Powell is flat out Wrong
According to the Wall Street Journal, Fed Chairman Jerome Powell does not see a new to raise the federal benchmark rate. The federal benchmark rate assists in determining national interest rates for everything from Car Loans to Mortgages and it is a key financial figure. It is also used as a crude tool to attempt to control inflation. Although its ability to do this, is somewhat questionable.
One important thing to note is that the federal funds rate plays a key role in determining how much money people make from Interest bearing savings accounts. These accounts would include Mom and Pop savings accounts at Bank of America, US Bank, and local credit unions.
He states in another WSJ article "With nothing in the outlook demanding an immediate policy response...adopted a patient, wait-and-see approach to considering any alteration in the stance of policy," This is flat out the incorrect way to view this.
All of these economists are overly focused on today's rate with very little interpretation of where they sit from a historical perspective. "The current federal funds rate as of May 02, 2019 is 2.41%." And that is far, far, far below average. In the Federal Funds rate shot up to the 20s. And during the great recession of 08 the rate hovered near zero. But after our recovery from the depths of the recession to an all time new high stock market, we have only come up to 2.41%. This is not high enough, by any measure.
If the rate is now at 2.4, we do not have much depth to lower it when the next recession comes. If you question this logic - know Just this. Before the 08 recession the Federal Funds rate stood at a high of 5.27%, almost twice what it is today. (Even that 5.27% number is not that high)
What all of this means was when the recession hit, there was about 5 points were of room to lower the rate to fight the great tsunami of a recession.
"In some ways, we are returning to the precrisis normal. In other ways, things will be different,” Mr. Powell said." That is just not true.
One important thing to note is that the federal funds rate plays a key role in determining how much money people make from Interest bearing savings accounts. These accounts would include Mom and Pop savings accounts at Bank of America, US Bank, and local credit unions.
He states in another WSJ article "With nothing in the outlook demanding an immediate policy response...adopted a patient, wait-and-see approach to considering any alteration in the stance of policy," This is flat out the incorrect way to view this.
All of these economists are overly focused on today's rate with very little interpretation of where they sit from a historical perspective. "The current federal funds rate as of May 02, 2019 is 2.41%." And that is far, far, far below average. In the Federal Funds rate shot up to the 20s. And during the great recession of 08 the rate hovered near zero. But after our recovery from the depths of the recession to an all time new high stock market, we have only come up to 2.41%. This is not high enough, by any measure.
If the rate is now at 2.4, we do not have much depth to lower it when the next recession comes. If you question this logic - know Just this. Before the 08 recession the Federal Funds rate stood at a high of 5.27%, almost twice what it is today. (Even that 5.27% number is not that high)
What all of this means was when the recession hit, there was about 5 points were of room to lower the rate to fight the great tsunami of a recession.
"In some ways, we are returning to the precrisis normal. In other ways, things will be different,” Mr. Powell said." That is just not true.
Comments
Post a Comment