Waiting for rate cuts. Suppose they NEVER come?

Photo above – Fed Chairman Powell appears on 60 Minutes, where he stared into the camera and assured us: “every single person on the Federal Open Market Committee believes that it will be appropriate for us to reduce interest rates this year." Now we're being told that we "misinterpreted" his comments.

The article in the link below originally appeared in Fortune Magazine. I'm linking to the Yahoo Finance version, because Fortune is behind a paywall.

If you're a fan of money, you probably can remember at least a half dozen times when Fed Chairman Jerome Powell appeared on TV to contradict himself. Rate cuts are imminent. Rate increases are on hold. Probably no cuts for 3 months. Maybe in the summer, just before the election. His most notable appearance was as a surprise guest on 60 Minutes. He agreed to this interview because the DJIA was swooning. Mr. Powell's prime time pep talk worked. The market resumed climbing the next day.

Enter Fortune Magazine, and its highly paid economists. Certainly, more highly paid than Jerome Powell, who earns $203,000 (which would officially be lower middle class in New York or San Francisco). Fortune says we've ALWAYS been misinterpreting Powell. He NEVER intended to cut rates. Instead, Powell was simply “trying to talk financial markets into creating an easier environment”. Yes, this is a direct quote.

So apparently, we were lied to, and were not going to get rate cuts this year. At least they're not needed as much, now that Trump has been convicted, and Biden has smoother sailing to re-election. Powell's previous pep talks, suggesting “that as many as six cuts would happen in 2024, spark(ed) a massive stock market rally” (again, an exact quote). And in addition to buying stocks, consumers continue to spend everything BUT homes, because homes are out of reach.

What else is driving inflation? “The federal government has been spending trillions of dollars on infrastructure, green-energy initiatives, and semiconductor production capacity.” Yep – spending twice as much in 2024 as it collects in taxes. How could this NOT result in inflation? Duh . . . higher interest rates are supposed to REDUCE borrowing. Instead, the federal government is spending and borrowing more than ever, while expecting us to carry the burden of high rates.

This is the worst of all possible worlds. The government is piling trillions and trillions onto the national debt. People are enduring the highest mortgage rates in 2 decades. And housing unaffordability continues to get worse. The perfect storm of failed government policies. And some nitwits are still marching around chanting “Bidenomics – yaaaaay!”

I'm just sayin' . . .

~Jerome Powell’s Federal Reserve is stuck in a self-defeating paradox that makes cutting rates more difficult, economist warns (yahoo.com)~

Top | Newest First | Oldest First

zonavar68 · 51-55, M

The 0 percent interest rates on savings (which many banks still have now) and almost zero interest rates on loans were crazy indeed, but now the corporate elite in finance and government laugh all the way to the preverbial over how much money they are now making via the accelerated wealth concentration created by Covid.

SusanInFlorida · 31-35, F

@zonavar68 max - thanks for your reply.

my take is that bankers - both main street and wall street - are scare $hitless at the coming commercial property loan default rates. i saw an article yesterday that predicted the FDIC doesn't have enough reserves to bail the lenders out.

i reiterate a point i've made often before: If a bank or brokerage accepts an FDIC deal, or other government assistance, the BY LAW it should have dismiss the CEO, president, and all the president's direct reports. A new board of directors must be elected too.

deal?

zonavar68 · 51-55, M

@SusanInFlorida Well the USA already had the Fannie Mae and Freddy Mac scandal. We've not had anything like that here. The 'big 4' banks are considered 'too big to fail' by the government.

SusanInFlorida · 31-35, F

@zonavar68 The european model of banking is the envy of US regulators. Keep the industry penned in - just 5 or 6 giant banks, which are easier to keep your eyes on and regulate than 5,000 small and medium size ones.

This is facilitated (large bank control) by placing PERMANENT REGULATORS on site at those institutions. Government employees who spend all 8 hours of every day evaluating compliance with new lending guidelines, loan delinquiencies, hedged currency bets, etc.

The fun starts when those banks figure out they can easily bribe some regulator who is only earning $120,000 a year.

SumKindaMunster · 51-55, M

We still have inflation, that's why they haven't cut rates.

It's not like we were promised that rate cuts would happen whether or not inflation goes down, they have been very clear about that for the last several years. Only when inflation gets closer to their 2-3% range, we aren't there yet.

If you have money, there are multiple banks offering savings accounts in the 4-5% plus range. Put your money in one of those while you are waiting for the interest rate cuts.

whowasthatmaskedman · 70-79, M

Lets not forget that interests currently are much closer to traditional "normals" than they were for the past 5 years or so. Those were extraordinary times..😷

Ferric67 · M

you're not wrong susan
we are due for a market correction

SusanInFlorida · 31-35, F

@Ferric67 i have been so wrong for so long about this. at some point it will happen. and everyone with a 401K or and IRA is going to explode with disbelief. THAT's what will cause home prices to plummet.

whowasthatmaskedman · 70-79, M

@SusanInFlorida Its only the contortionist act by successive administrations and the Fed that have kept the economy ticking over. But the tools that use arent working the way they once did..😷

BizSuitStacy · M

Spot on.

Add a comment...