Fed Signals Rates to Stay Near Zero for at Least Three Years

Fed Signals Rates to Stay Near Zero for at Least Three Years

https://www.bloomberg.com/news/arti...-will-stay-near-zero-for-at-least-three-years

"The Federal Reserve left interest rates near zero and signaled it would hold them there through at least 2023 to help the U.S. economy recover from the coronavirus pandemic.

The Federal Open Market Committee “expects to maintain an accommodative stance of monetary policy” until it achieves inflation averaging 2% over time and longer-term inflation expectations remain well anchored at 2%, the central bank said in a statement Wednesday following a two-day policy meeting."

My take: It is the right decision to keep a 0% interest rate at the current time. Of course, this will prop up the stock market, as we are already seeing today.

It will be interesting to see the reaction of conservatives, who have criticized Obama and then Fed Chairman Bernanke for years for keeping interest rates too low and for punishing savers. I am sure Trump will not say a peep about this. Maybe we have a new helicopter Jerome.

Beside the polemics, it is my opinion that long term interest rates are set by market forces. The Fed can only do so much to oppose the market. For more than a decade now, too much money is chasing too few safe investments. That's why interest rates are low and will remain low. The solution to the problem: Get rid of the supply side economic policies.

 

There was a lot negative talk about Obama when his Admin did the same.

 

And you know the people who are hurt the most are people that saved all their lives, and thought they were going to live off the interest. Those people are getting absolutely creamed.

 

Makes sense. For the economy to recover we need to encourage capital expenditure and provide cheap funds.

 

The ones who did it right — they saved their money and they cut down on their mortgages, ... and now they're practically getting zero interest on the money, Those people have really been -- you could almost say discriminated against.

 

Yah but that because republicans were rooting for a recession under Obama.

 

I think you discount a number of things here. First, low interest rates disincentivises foreign investment in treasuries. If you were thinking about hegemony, as Obama et al did, that is destructive. It certainly wasn't for the benefit of the nation, and frankly it isn't a stretch to suggest that what Obama was hoping for was uncompetitiveness without understanding. More, it incentivized foreign ownership in market securities. how is that working out now? And yes, it surely hurt those who's portfolio was particularly sensitive to savings interest income. I don't know that many of them, to be honest. Most folks I know transferred away from savers into investors long ago. But sure, for some, 1975 never stopped...

The second structural difference is at the time Obama was making hay with low interest rates, he was also trying to force or at least direct investment. All of those schemes of incentives for green this, or green that, were premised on not making his directee businesses have to pay high interest rates. We know this, so who, really are you trying to kid here.

Now, given the demand from the left to turn off the economy for "safety", the road to rebuilding has to be built on something. Inducing high interest rates now only makes money for banks, are in your mind, aren't banks inherently evil? So why throw them the bone now? I don't like the idea of structural debt, but at least debt is being used for something productive, like helping folks rebuild from the damage of the quarantines that they never voted for, or otherwise had a voice in protecting themselves from. It does, actually, now make sense to keep funds flowing with low interest rates so that folks do have the ability to have access to funds they can afford to rebuild with. This isn't hard. But I think it is petty and disingenuous of you for having tried to raft a partisan attack where really, you're on the losing side of.

 

Not at all. They paid down debt when the cost of borrowing was higher and now they have a lot more equity built up in their home. They are in a position now where if they wanted to they could take out that equity in terms of low cost loans and invest in other properties or investments. Without more details it seems like they probably chose a very wise strategy.

 

Haha, as I expected, Obama, low interest rates bad, trump, low interest rates good. Nice flip flop, with rambling rationalizations.

The problems in your argument:
1) Obama didn't set interest rates, it was Bernanke, Chair of the Fed, an independent agency.
2) GWB nominated Bernanke, not Obama. Approved by the House and Senate,
3) Obama nominated Yellen, but only was in office for his last two years. Approved by the Republican House and the Republican Senate.
4) Trump spoke many times to influence Powell to reduce interest rates, to juice up his "magical" economy.
5) Low interest rates are bad for savers, whether Obama is president or Trump is president.
6) Low interest rates are good for the stock market, whether Obama is president or Trump is president.

Take off your partisan blinders.

 

Strange i thought the criticism was for the waves of QE with no accountability.

 

Silly to point that out as the "Chair" can only be picked from amongst the Governors of the Fed who all are nominated for 14 years.

 

Interesting. So, ignore the actual analysis, and the evidence contained within it, and trot our your canned talking points memo.. That isn't discussion, btw. And while no one said Obama "set interests rates", I know I didn't, he certainly crafted policy that took advantage of it, no?

When Obama was actively creating tax policy that directed investment, did you whine about it? I don't recall it. But perhaps you did. Who knows at this point. The real issue is that you actually believe that there are this massive pool who are only savers. I'd point out that I don't actually know any of these folks. I know folks who invested in annuities who couldn't care less how the provider invested on their behalf as long as the payout liquidity was still there. Who are these savers only folks you refer to? In an environment where folks watch the endless diminishing returns from their savings, why wouldn't they have already assumed a different, more positive investment strategy?

When you ascribe "good" or "bad", I think you are actively ignoring the supporting information that actually tells quite a different story, and said as much. Are you still going to tie yourself to extensive foreign ownership? How is that a good thing in this country? When Chinese interests require their vessels in this country to conform to their version of "freedoms", are you suggesting that was a good idea? There are so many inconsistencies in your approach here.

 

Since he wants to play who nominated what Chair he left out Yellen was looking at negative rates.

 

Exactly this. Its really a good time to make some real estate investments and moves right now. The 30yr rate is under 3% and the 15yr refi is like 2.43 or something insanely ridiculously low - and in turn the real estate market is on absolute fire in many areas. The only places that are sucking wind right now are the close in suburbs to major cities and urban areas.

 

You were the one going on about how low interest rates were disincentivizing foreign investment, which was supposedly bad under Obama? Now, it is not a problem under Trump?

In the real world, the reasons for low interest rates are actually similar now than they were in 2008. A recession, or near depression. I notice, though, that you left the part out that Obama inherited the great recession from GWB, which made low interest rates necessary, not because Obama "hoped" to make the US un-competitive, which is actually a baseless and rude partisan attack.

 

Did you miss that part of the article?

"The central bank repeated it will continue buying Treasuries and mortgage-backed securities “at least at the current pace to sustain smooth market functioning.” A separate statement on Wednesday pegged those amounts at $80 billion of Treasuries a month and $40 billion of mortgage-backed securities."

Looks like the helicopter is back. Only this time, you won't hear a peep from the Tea Party, just like you didn't hear a peep when Trump added $1.5 trillion plus to the deficit for his tax cuts for the rich.

 

I suppose not understanding goals is going to be an issue going forward. I cited a reference where the previous administration used monetary policy to attack hegemony for the purpose of attacking hegemony. Would you not think that was a poor policy? Just as I also suggested that demanding through incentivization of investment in his crony crop of green enterprises, which, all failed. I understand that actual accountability might not be high on your list of personal traits, but when your goal is destroying the economic fabric using low interests rates to get you there seems to me to be an entirely different goal set that allowing folks who frankly can't afford high interest rates the ability to rebuild the economy.

The "orangeman bad" crap just has to end.

 

The problem is that no matter what the news - it is immediately filtered into the "how can we make this into a story detrimental to Trump" line of thinking.

 

A corporation can be one person how many times does this have to be explained to you. Just because you have a S-Corp or the like does not make you "rich".

 

And I showed you before that Obama could not use monetary policy for what you allege because he did not have the power to set interest rates. That was Ben Bernanke, who was nominated by GWB and approved by congress.

 

with no accountability. Is what i said.

 

No, I am just pointing out the hypocrisy of those who howled every time Bernanke kept the interest rates near zero during Obama's term, only to not say a peep when the same thing is happening under Trump.

 

Willful ignorance is not the answer.

 

Back when i had some respect for him.. Are you not a Sanders supporter?

 

What does that have to do with it? I opposed the bailout at that time. Unfortunately, it wouldn't have mattered whether Obama or McCain had been president, their hands were tied and they had to do it, to prevent the financial system from collapsing. Does that mean that irresponsible lenders got loans they shouldn't have? Probably yes. Maybe that was a small price to pay for avoiding a depression. What would your solution have been?