Fed Officials Ignore Trump, US To Keep Raising Interest Rates!

[Economy 53,076]

https://www.bnnbloomberg.ca/fed-ready-to-hike-again-if-economy-remains-on-track-1.1127329

 

Despite Trump criticizing the Federal Reserve (US Central Bank) publicly saying they should stop raising rates so they don't slow down economic growth, the Fed has indicated it has no plans to listen to Trump and that the rate hikes are not over and there's more to come

 

The Central Bank continues to worry that a tightening labor market and companies at or near full capacity will create high inflation and imbalances if growth is not allowed to slow to the pace of productivity gains and labor market/population growth

 

Low rates during strengthening economy has been known to cause problems in the past such as too much inflation, asset bubbles, high debt levels and distortions in Capital Allocations

 

The official rate was dropped down to 0% in 2008 where it remained for several years. It has been gradually hiked over last two years now at 1.75%. That is still low by historical standards

 

[Mikolaj 11,640]

I would trust the feds to know their stuff better than Trump.

[Economy 53,076]

1 minute ago, ExMachina said:

I would trust the feds to know their stuff better than Trump.

They do. They are following the book on stuff like inflationary pressures, productive capacity, what they call "slack in the labor market" etc

 

Trump is think about this from a level 1 noob new to economics standpoint that lower rates promote more economic growth

 

Yes it's true that they do, but long term if growth is not balanced and sustainable it creates imbalances that later lead to a harder crash when the expansion in the business cycle ends...

 

The 2008 crisis and housing crash of 2007 by some is partially blamed on the fact that after the 2001 .com bubble recession rates were too low for too long when economy quickly took off despite there being other factors at play

 

He seems to like that wreckless style tho, overspending more now for more growth now while bankrupting America more for the next generation

 

[Mikolaj 11,640]

Trump cares about growth because that's what he can spam on twitter about when it works. But he doesn't care that literally everything about economy is a tradeoff. High inflation wipes out purchasing power and wages are stagnant anyway, so...

@Economy tons of respect for keeping all the hunties educated on the basics of how economies work. I'm starting Economics course in September and maybe will join your good cause! 

[Economy 53,076]

49 minutes ago, ExMachina said:

Trump cares about growth because that's what he can spam on twitter about when it works. But he doesn't care that literally everything about economy is a tradeoff. High inflation wipes out purchasing power and wages are stagnant anyway, so...

@Economy tons of respect for keeping all the hunties educated on the basics of how economies work. I'm starting Economics course in September and maybe will join your good cause! 

That's one of the reasons they don't want inflation to go above 2% to 3%. If demand rises faster than companies can increase their capacity to match (when the slack of spare capacity is gone), they can raise their prices a lot very quickly because the services and goods are in shortage and that does not benefit the consumer or the general economy. It hurts those who don't get much raises and it damages savings

 

It's not worth it to have demand exceed productive capacity so higher rates are used to slow spending and borrowing so that demand grows along with productive capacity and so Inflation doesn't go out of control

 

It also prevents people and even businesses from borrowing more than they can afford when economy is better and people are more confident. Low rates during this time encourages binge borrowing which can lead to a Financial crisis after

 

Another thing higher rates do by slowing economy is it slows down Corporate earnings growth and investors don't go manic way in over their heads and cause a short term surge in growth and if earnings fail to hit expectations creates a crash after

 

When economy is weak you lower rates, when it's getting stronger you have to raise them. The Central Bank knows what it's doing, Donald Trump does not. Anyone that has learned about economics knows why u have to

 

In Turkey the Government pressured the  Central bank to keep rates down and look at the crisis that has started there

 

This is why it is encouraged that Central Banks remain seperate from the Government. If politics comes into play it can affect their decisions badly and they can't do their job in peace

[Woolfsmck 2,763]

Don't forget that Banks are stronger with higher interest rates because saving accounts become viable assets for depositers increasing reserves for the banks emwith increased depositers balances.

Trump is using the office to line his own pockets and his supporters.

[Economy 53,076]

3 hours ago, Woolfsmck said:

Don't forget that Banks are stronger with higher interest rates because saving accounts become viable assets for depositers increasing reserves for the banks emwith increased depositers balances.

Trump is using the office to line his own pockets and his supporters.

Plus before he was elected he used to criticize the Fed Policy of low rates all the time

 

Hypocritical much

 

Shocked... Not