Thread

1. dabinat · 1789588567 · focus · HN ↗

   Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it.

   This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a time delay.

   1. carefree-bob · 1789594347 · focus · HN ↗

      A 0.25% rate hike is going to cause a recession? How, exactly, would that happen?

      Honestly it seems your post is heavy on politics but I am not seeing an actual argument anywhere in there.

      My canned response to people being upset at various policies or ratios, whether it is inflation, or bond yields, or market movements, is to ask them what they think the correct value should be. Stop complaining about the movement and instead ask them for their target. You think a 4% FedFunds is too high or too low? What do you think the correct value is and why? You think the stock market is too high or too low, what do you think the correct value of the index should be?

      Most people, who were just moments ago vociferously complaining about a movement, when asked this question fall silent, because they have no idea what the target should be, and because they have no idea about the target, they really have no business complaining about movement. Instead, they use the movement as a springboard to air their ideological beefs. But if you are going to tie some thesis to a rate hike, you better be able to explain what you think the correct rate should be and why. I'm waiting.

      Personally, I think a 4% rate is perfectly fine. 5% may even be warranted, and historically this has not been a high rate, if you assume, say, 2.5% inflation and 2% GDP growth, this is a pretty reasonable place to be.

      1. quickthrowman · 1789594793 · focus · HN ↗

         > A 0.25% rate hike is going to cause a recession? How, exactly, would that happen?

         I didn’t see anyone claim a single 25 bps hike will cause a recession.

         The 30 day FFR futures (/ZQ) curve is pricing in an 80% chance of two more hikes by the March 2027 meeting and a 70% chance of 3 or 4 hikes by Sept 2027’s meeting. So, 50 bps predicted in the next 6 months and 25-50 bps more within one year.

         Source is the CME Fedwatch tool: <a href="https:&#x2F;&#x2F;www.cmegroup.com&#x2F;markets&#x2F;interest-rates&#x2F;cme-fedwatch-tool.html" rel="nofollow">https:&#x2F;&#x2F;www.cmegroup.com&#x2F;markets&#x2F;interest-rates&#x2F;cme-fedwatch...

         I think we’ll need to go to 5%+ within the next two years if fuel costs remain elevated.

         1. smackeyacky · 1789596316 · focus · HN ↗

            I don’t understand why central banks seem to use such a blunt object like interest rates for every inflation problem. It would make sense to rise if the cause of inflation was accelerated economic activity, not price rises due to supply restrictions. How does hurting mortgage holders even more help with not starting wars? All it can do is have a double dampening effect on the economy as people pull back their discretionary spending.

            Using interest rates for this kind of inflation is guaranteed to cause a recession.

            1. what · 1789598232 · focus · HN ↗

               &gt; hurting mortgage holders

               How does raising rates hurt mortgage holders? They locked in their interest rate when they got the mortgage?

               1. metajack · 1789601012 · focus · HN ↗

                  Not all mortgages are fixed rate.

                  1. carefree-bob · 1789601534 · focus · HN ↗

                     95% of mortgages are fixed rate in the US. And even that number is too low, most of the ARMs are taken out by businesses, not households.

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