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The U.S. may be entering a new era of persistently high interest rates


Geee

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Axios

Why it matters: Major shifts in the economic landscape typically don't happen overnight, but rather in fits and starts — as a period of discovery that something important has changed.

  • The movement in rates, inflation and the outlook for Fed policy over the last few months — and especially over the last week — fits that pattern.

The big picture: The Fed's plans to pivot toward interest rate cuts in the near future — more or less announced in December — are in disarray after three straight months of elevated inflation to start 2024.

  • Chair Jerome Powell confirmed that Tuesday, saying that "[g]iven the strength of the labor market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us."
  • But apart from tactical considerations the Fed must make in deciding its interest rate policies, action in bond markets is consistent with a bigger rethinking underway as to where rates will settle once the recent bout of inflation is long over.
  • :snip:
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SDwaters

Not sure that cutting interest rates is something needed right now.  Afterall, in a financial crisis, the ability to cut rates is one of the best weapons the Fed has.  Don't use up your ammunition before you need to.

Also, note below that current rates are still in the lower half of historic levels.

 

image.thumb.png.681e550985e93abd14898ead7cc0008c.png

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13 minutes ago, SDwaters said:

Not sure that cutting interest rates is something needed right now.  Afterall, in a financial crisis, the ability to cut rates is one of the best weapons the Fed has.  Don't use up your ammunition before you need to.

Also, note below that current rates are still in the lower half of historic levels.

 

image.thumb.png.681e550985e93abd14898ead7cc0008c.png

I must admit, it is nice to get more than a lousy half percent on a CD. I did notice (haven't looked in a while though) that as far as CDs go there was an inverted yield curve. Seemed strange to me. That kind of seemed to me that the people who watch these things were expecting lower rates long term.

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