> Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Lisa D. Cook; Mary C. Daly; Beth M. Hammack; Philip N. Jefferson; Adriana D. Kugler; and Christopher J. Waller. Voting against this action was Michelle W. Bowman, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting.
This would be the first dissent by a governor in the FOMC since 2005.
>This would be the first dissent by a governor in the FOMC since 2005.
Yes, but for context- not the first dissent broadly, as there are 5 non-governors on the FOMC.
>In June 2022, Kansas City Fed President Esther George cast what until Wednesday had been the most recent dissent. She had argued for a smaller rate hike, but her colleagues opted for a 75-basis-point increase to battle accelerating inflation.
https://www.reuters.com/markets/rates-bonds/fed-bowmans-diss...
Anyone else think this indicates a lower short-term floor (say, 4.x%) than previously thought?
What counts as short-term? On a monthly basis this is definitely lower because they cut by 0.5% instead of 0.25%. On a 2026+ basis expectations have been steady at ~3%, don't understand how 4.x% could be lower than that.
Personally I think the 3% long-term expectation is ridiculous, and we'll either see high (10%+) rates as inflation spirals out of control, or low (0%) rates as we get another depression, and likely oscillation between the two of them. You can't use monetary policy to fix a demographic problem. But the projection for 3+ years out has held constant at 2.5-3% since at least 2018, even as the reality went from 2.5% to 0% to 5% during that time period. Just like all the projections for inflation always converge on 2% even if they're wrong.
> On a 2026+ basis expectations have been steady at ~3%
Source?
Couple ways to think about it:
One is the Fed dot plots that the Fed puts out with each FOMC statement. These are a poll of Fed governors about what they think interest rates will be like at various points in the future. The midpoint of the current spread is about 3%. You can Google for past FOMC statements and look up historical data, but it's stayed at around 3% since at least 2018, with a slight dip to maybe 2.5% in 2020/2021:
The other is the rates on 3Y Treasury Bonds, which measure what bond traders consensus expectation for the average interest rate over that 3Y period will be. To go out further (and minimize the impact of short-term fluctuations), you could also go out to 5Y. Currently, both are trading at 3.5%, which indicates that the market expects that the Fed will equilibrate at about 3.5%.
Meanwhile, $1 trillion every 3 months is added to the national debt.
Meanwhile, African Dogs are not members of the genus Canis, like wolves and domesticated dogs, but a sibling genus Lycaon. Both African Dogs and other dogs are members of the Canidae family.
What an odd response. If you are somehow trying to call me an African Dog, then I accept your gracious compliment.
Imo, GP wanted to say that news about the national debt are as important as the information about content of martian rocks.
Correct. Or rather, that it's not relevant to the discussion at hand. The federal reserve rate has nothing to do with the national debt.
It absolutely does impact the national debt. The FFR is the range on inter-bank lending which the FED themselves state attempts to influence other interest rates. Also, the FFR is really just a target range; they still have to adjust interest on reserve balances to bring the actual rates down and you'll see they've done this: https://fred.stlouisfed.org/series/IORB
When a bank gets less return on excess reserves, it will want to make more loans. For regulatory reasons they have to hold some treasury bonds as collateral which again puts upward pressure on treasury prices. Rising bond prices pushes down treasury bond yields. Low yields on treasury bonds makes it easier for the government to borrow and rack up even more debt.
Generally, more liquidity to bid up assets, including treasury bonds (which are still attractive while yields are relatively high), will push down yields everywhere.
A major portion Federal Government debt is interest charges; the government pays for borrowing money.
Interest rates affect the amount of interest owed. After decades of low interest, the past five years of interest rate hikes have dramatically increased government debt.
Lower rates won't lower the amount already owed, but would help slow the rate of increase of the debt burden moving forward.
Lower rate also encourages more borrowing. So it's not clear how the rate will affect the debt. I'd say it's not the deciding factor.
This is the argument that republicans always throw around before they make a run for office, but somehow magically it turns into more spending. Things like the trillion dollar boondoggle of the F35 and the massive shit show of the war in Iraq.
I am not sure why so many take it as a partisan observation. There was a time when a total debt of $1 trillion was controversial in politics and economics.
Lowering the rate also determines how much it costs to sustain the debt spending. So my comment was related in an economic sense.
I also prefer to have sustainable Government institutions and social programs which increasing debt will eventually threaten.
Maybe the system can sustain $50 trillion with $2 trillion added every month. We will find out eventually with the current path.
It already costs more to service existing debt than even defense spending.
The debt is still a massive problem
The fed rate is also the rate that the national debt interest is paid on
Will this encourage further and increased debt spending ?
When will spending get cut to stop the bleeding?
America has a spending problem.
It's possible for this to be a real problem and for Republicans to simultaneously be full of shit.
The increasing debt represents a wealth transfer to asset holders. If you can exchange your dollars for things like houses, before those dollars are devalued, then you win. This is regressive.
This is not an argument for fewer social programs. It is an argument for more taxes.
Spending more in order to force taxes up later isn’t good policy.
We need to cut spending to match taxes, then start deciding what’s important and what people want to pay for with increased taxes
Giving people everything for “free” to win the next election is very bad policy for the country
> economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low.
If this round of cutting manages to keep GDP stable or up, it would be the first time on record that the unemployment rate rose so much from its trough without a recession occurring soon after
> Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Lisa D. Cook; Mary C. Daly; Beth M. Hammack; Philip N. Jefferson; Adriana D. Kugler; and Christopher J. Waller. Voting against this action was Michelle W. Bowman, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting.
This would be the first dissent by a governor in the FOMC since 2005.
>This would be the first dissent by a governor in the FOMC since 2005.
Yes, but for context- not the first dissent broadly, as there are 5 non-governors on the FOMC.
>In June 2022, Kansas City Fed President Esther George cast what until Wednesday had been the most recent dissent. She had argued for a smaller rate hike, but her colleagues opted for a 75-basis-point increase to battle accelerating inflation. https://www.reuters.com/markets/rates-bonds/fed-bowmans-diss...
Some more discussion: https://news.ycombinator.com/item?id=41583327
Anyone else think this indicates a lower short-term floor (say, 4.x%) than previously thought?
What counts as short-term? On a monthly basis this is definitely lower because they cut by 0.5% instead of 0.25%. On a 2026+ basis expectations have been steady at ~3%, don't understand how 4.x% could be lower than that.
Personally I think the 3% long-term expectation is ridiculous, and we'll either see high (10%+) rates as inflation spirals out of control, or low (0%) rates as we get another depression, and likely oscillation between the two of them. You can't use monetary policy to fix a demographic problem. But the projection for 3+ years out has held constant at 2.5-3% since at least 2018, even as the reality went from 2.5% to 0% to 5% during that time period. Just like all the projections for inflation always converge on 2% even if they're wrong.
> On a 2026+ basis expectations have been steady at ~3%
Source?
Couple ways to think about it:
One is the Fed dot plots that the Fed puts out with each FOMC statement. These are a poll of Fed governors about what they think interest rates will be like at various points in the future. The midpoint of the current spread is about 3%. You can Google for past FOMC statements and look up historical data, but it's stayed at around 3% since at least 2018, with a slight dip to maybe 2.5% in 2020/2021:
https://finance.yahoo.com/news/fed-dot-plot-suggests-central...
The other is the rates on 3Y Treasury Bonds, which measure what bond traders consensus expectation for the average interest rate over that 3Y period will be. To go out further (and minimize the impact of short-term fluctuations), you could also go out to 5Y. Currently, both are trading at 3.5%, which indicates that the market expects that the Fed will equilibrate at about 3.5%.
https://www.cnbc.com/quotes/US3Y
https://www.cnbc.com/quotes/US5Y
Why?
Meanwhile, $1 trillion every 3 months is added to the national debt.
Meanwhile, African Dogs are not members of the genus Canis, like wolves and domesticated dogs, but a sibling genus Lycaon. Both African Dogs and other dogs are members of the Canidae family.
What an odd response. If you are somehow trying to call me an African Dog, then I accept your gracious compliment.
Imo, GP wanted to say that news about the national debt are as important as the information about content of martian rocks.
Correct. Or rather, that it's not relevant to the discussion at hand. The federal reserve rate has nothing to do with the national debt.
It absolutely does impact the national debt. The FFR is the range on inter-bank lending which the FED themselves state attempts to influence other interest rates. Also, the FFR is really just a target range; they still have to adjust interest on reserve balances to bring the actual rates down and you'll see they've done this: https://fred.stlouisfed.org/series/IORB
When a bank gets less return on excess reserves, it will want to make more loans. For regulatory reasons they have to hold some treasury bonds as collateral which again puts upward pressure on treasury prices. Rising bond prices pushes down treasury bond yields. Low yields on treasury bonds makes it easier for the government to borrow and rack up even more debt.
Generally, more liquidity to bid up assets, including treasury bonds (which are still attractive while yields are relatively high), will push down yields everywhere.
A major portion Federal Government debt is interest charges; the government pays for borrowing money.
Interest rates affect the amount of interest owed. After decades of low interest, the past five years of interest rate hikes have dramatically increased government debt.
Lower rates won't lower the amount already owed, but would help slow the rate of increase of the debt burden moving forward.
Lower rate also encourages more borrowing. So it's not clear how the rate will affect the debt. I'd say it's not the deciding factor.
This is the argument that republicans always throw around before they make a run for office, but somehow magically it turns into more spending. Things like the trillion dollar boondoggle of the F35 and the massive shit show of the war in Iraq.
I am not sure why so many take it as a partisan observation. There was a time when a total debt of $1 trillion was controversial in politics and economics.
Lowering the rate also determines how much it costs to sustain the debt spending. So my comment was related in an economic sense.
I also prefer to have sustainable Government institutions and social programs which increasing debt will eventually threaten.
Maybe the system can sustain $50 trillion with $2 trillion added every month. We will find out eventually with the current path.
It already costs more to service existing debt than even defense spending.
The debt is still a massive problem
The fed rate is also the rate that the national debt interest is paid on
Will this encourage further and increased debt spending ?
When will spending get cut to stop the bleeding?
America has a spending problem.
It's possible for this to be a real problem and for Republicans to simultaneously be full of shit.
The increasing debt represents a wealth transfer to asset holders. If you can exchange your dollars for things like houses, before those dollars are devalued, then you win. This is regressive.
This is not an argument for fewer social programs. It is an argument for more taxes.
Spending more in order to force taxes up later isn’t good policy.
We need to cut spending to match taxes, then start deciding what’s important and what people want to pay for with increased taxes
Giving people everything for “free” to win the next election is very bad policy for the country
> economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low.
If this round of cutting manages to keep GDP stable or up, it would be the first time on record that the unemployment rate rose so much from its trough without a recession occurring soon after
https://fred.stlouisfed.org/series/UNRATE
Does that mean the US is more productive with less labor? (I guess it's not normalized against working age population.)