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Powell: "US Rates To Remain Elevated For Some Time"


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Economy

https://www.bnnbloomberg.ca/jerome-powell-fed-to-keep-rates-higher-for-longer-to-cut-inflation-1.1853178

 

Jerome Powell of the US Fed said interest rates are not yet finished rising and that when they hit their peak likely early next year it's unlikely that they will immediately start to drop but instead remain elevated on a pause for some time to allow it time to work through entire economy

 

Central Banks all around the world have gone into rate hike panic mode after innitially not reacting when inflation first starting to rise under the assumption it was "transitory".

 

When it started to become clear inflation wasn't transitory and was in fact accelerating, central banks began sharp increases hoping to make up for lost time and fight Inflation before it becomes permanently entrenched in expectations and fuels itself

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Economy
1 hour ago, pachinko said:

@Economy when should I buy my house?  When will prices be low? When will interest be high? 

I mean u can never be sure of such things. 

 

But based on a likely hiking cycle ur looking at rates peaking sometime early to mid next year (fixed rates will probably peak and start falling before the variable ones cuz the market does that when it anticipates rates are about to fall)

 

If u wanted to buy at the lowest prices possible without heavy long term rates, probably sometime by spring 2023 would be ideal. Prices should be near bottom by then cuz rates will be near their peak

 

If u take a variable rate then, it's likely that rate will start to drop some months later and u won't be paying that top rate for very long

 

But of course it may also vary by market, and trying to time the market exactly is difficult even for the smartest experts so caution :enigma:

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thehanyo

One other thing they mentioned is that unemployment is TOO LOW, oddly enough. They want it to climb to around 5.5% (it's currently 3.7) before they even think about lowering rates again.

Agree with @Economy that Spring 2023 is likely the bottom of the housing market, with Q4 2023 being the earliest you see could rates start to come down-- it really depends how bad this recession that has a 50% chance of happening next year is.

Altho conventional wisdom has been thrown out the door a few times in the past couple years. The fact that holding cash right now is better than having it either in the market OR in bonds is soooo weird lol.

Edited by thehanyo
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Economy
1 hour ago, thehanyo said:

One other thing they mentioned is that unemployment is TOO LOW, oddly enough. They want it to climb to around 5.5% (it's currently 3.7) before they even think about lowering rates again.

 

The interesting thing is that a very low unemployment rate also throws stuff out of balance so it's not necessarily a good thing. So many businesses can't produce to their full potential cuz they are short staffed and it leads to the most random product shortages all over the place. Some of the items off the shelves I saw this year can't possibly have anything to do with the pandemic anymore or even the war on Ukraine. They are so random

 

A labor shortage is usually a sign of an overheating economy and overheating economies always get a lot of inflation and unsustainable growth

1 hour ago, thehanyo said:

.

Altho conventional wisdom has been thrown out the door a few times in the past couple years. The fact that holding cash right now is better than having it either in the market OR in bonds is soooo weird lol.

Unless u do a short term GIC. U get a guaranteed 5% which is preferable to just holding cash

 

Only down side is if the market turns and u wanna invest in new opportunities, ur money is locked until end of maturity

Edited by Economy
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thehanyo
15 hours ago, Economy said:

Unless u do a short term GIC. U get a guaranteed 5% which is preferable to just holding cash

Only down side is if the market turns and u wanna invest in new opportunities, ur money is locked until end of maturity

Yes. I am hoarding cash for a few more months. Hoping the bottom is early next year and I can get back into the market then.

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