US Fed hikes rates 0.75%.
Now sitting at the year end target of 3.9% so this was pretty damn close estimate from almost a year ago.
Hikes will end only once unemployment breaks. Said this for almost a year now.
Next Unemployment data comes out on the 4th November.
I reviewed China market data yesterday (for my work) for the start of 11/11 sales which is the largest period of the year. Fucking horrific for everybody but The shining star that is Apple got absolutely wrecked by -50% YoY……..
Agree with bolded statement above. Powell will continue to raise rates until the "REAL INTEREST RATES" are not negative and instead possibly even to that of inflation. Right now, keeping money in the bank as savings makes no logical sense with the current inflation rate as you actually lose money by having it parked in the bank. Moreover, Powell will keep raising rates to cause unemployment to rise further, which in turn will lead to a slow down in the velocity of money on the ground level.
For others on the forum (not the guys that are participating in this thread and have a good grasp on *macro*-economics), here's a quick primer for better understanding as to what the fuck Powell and the FED are doing 👇
The Federal Reserve has "3 main tools" that are used to shape our monetary policy. I say "3 main tools" because it actually does have a few more than that. What are the 3 tools?
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A) Buying (Quantitative easing) and selling (quantitative tightening) of US bonds. - The buying of US bonds by the Fed (i.e. printing of money) leads to more currency being in circulation, which in turns leads to higher inflation. The selling of US bonds by the FED results in less money being in circulation, as the FED gets to hold on to that "money" instead of allowing it to circulate.
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B) Lowering/Raising interest rates. - Raising interest rates which makes it more expensive to borrow money (money for investing in the market, acquiring mortgages, get business loans, personal loans etc.). This is a way that Jerome Powell can also cause the unemployment rate to rise. Many businesses depend on borrowed money to fund their ventures. That borrowed money can be invested in assets that also include people. If businesses can't borrow money as they used to AND people aren't investing into those business via the stock market, that in turn leads to those businesses having to lay off people due to not having enough capital to work with, which in turn raises unemployment. Raising unemployment is beneficial to the FED, as it will also decrease the velocity of money, which in turn lowers inflation (This is a backdoor approach to lowering inflation. Powell is playing chess here, not checkers). In the opposite way, when the FED lowers interest rates, it leads to more people/institutions borrowing money as it is being lent out for practically free. More money being borrowed equals more money in circulation, which in turn leads to higher inflation.
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C) Determining the requirement of deposited money that banks are required to keep as cash. - When you have a lower cash requirement for banks, this leads to more cash banks can lend out which results in economic growth by putting more cash into circulation, but it can lead to increased inflation. When you have a higher cash requirement for banks, this leads to less cash the banks can lend out as they need to hold higher amounts in house, which leads to less cash in circulation and can then lead to lower inflation.
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