Fed Projects Three Rate Hikes Next Year

[applegrove]

Fed Projects Three Rate Hikes Next Year

December 15, 2021 at 2:04 pm EST By Taegan Goddard 87 Comments

https://politicalwire.com/2021/12/15/fed-officials-project-three-rate-rises-next-year/

"SNIP......

“Most Federal Reserve officials signaled Wednesday they were prepared to raise their short-term benchmark rate at least three times next year to cool high inflation,” the Wall Street Journal reports.

“As expected, officials also approved plans to more quickly scale back its pandemic stimulus efforts in response to hotter inflation, opening the door to rate increases starting next spring.”

......SNIP"

[bucolic_frolic]

1. The Powell Fed is already 6 months late

and they won't follow through when the markets plunge on their belated tightening, just like 2018-Jan 2019.

There were no consequences to the 1987 Crash, the 2001 Tech Bubble Burst, and the Great Recession turned upward when they announced rocket fuel. We have not had a generic, ordinary cyclical recession since 1973-75. And they do serve a purpose, they cleanse debt, they teach people to have backup plans in case of hard times, they eliminate inefficient companies with obsolete business plans and technology. None of that happens anymore. We don't take financial medicine because none is administered. Debts are managed, forgiven, written off. It's an age where capital is free. Near zero cost to borrow, therefore everything is profitable on a spreadsheet. Yet there is so much competition that profits are stretched thin. If there were an actual recession many businesses would cease operations. THerefore we can't have one. Here's some more free capital.

[applegrove]

2. I've not followed the markets. I don't remember a crisis in 2018 - 2019.

[bucolic_frolic]

3. December 2018 was a market plunge caused by Fed announced tightening

That was when interest rates moved to about 1.8% and everybody got all in a huff. They did it because they needed someplace to o in the event of another hint of recession. TFG upbraided Powell.

https://www.pbs.org/newshour/economy/making-sense/6-factors-that-fueled-the-stock-market-dive-in-2018

[applegrove]

4. Thanks. I bet business and hedge funds really resent having to fight

inflation too along with the general public. Usually the general public fought inflation with lower wages in the naughty and 2010s. There is a spec of dust on their millions that they can't flick off.

[bucolic_frolic]

5. The general public - low wage workers - benefit with recessions because prices fall.

High wage workers and companies benefit from prosperity because they can raise prices and drives returns to capital. So without a recession to cause prices to fall in almost 50 years, low income workers are suffering. The Great Recession wasn't typical because so much money was thrown at it due to the bank failures and mortgage crisis that it didn't impact prices of goods a lot, just houses and cars for a couple years. But poor people lacked the capital to take advantage.

[applegrove]

6. We've had tight money recessions in the last 50 years. Prices

have fallen because of trade and crap from Asia in good times too.

[bucolic_frolic]

7. Which is probably why we squeak by

Tech, innovation, and soft demand soften the upward march of food, autos, rents. Also the social safety net. But the purchasing power of minimum wage? nada.