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Jerome Powell: Change of heart?
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Let's hope.
And not some pissant percentage drop either.
A couple of full points will be appreciated by the housing market.
We’d be lucky to get half a point. I bet it’s a quarter point and the rates don’t move. Dammit!
I don’t really understand the argument for dropping rates at this point. Stocks are at an all time high, inflation is relatively under control (assuming you believe the statistics), and the labor market seems to be relatively robust. As far as the Fed is concerned there really isn’t a lot of reason to drop rates aside from administration pressure to juice markets even more headed into midterms.
As a recent homeowner I would greatly benefit from being able to refinance, but at the same time I don’t think it’s sustainable for rates to be essentially zero forever and housing prices to go to infinity, that’s irresponsible for the future as well.
Some of us want to buy things with all of the money from our stocks that are at an all time high.
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Huh, I was a bit late rolling out of the hay this morning but i see the dow is up almost a thousand points. I had heard on Wednesday i think that analysts were predicting a 92% rate cut in September. Now i see Powell making comments at Jackson Hole. Anybody else feel like some June Carter Cash when you hear "Jackson"? 🙂
And lets not forget how a rate cut helps, to whatever degree, the US debt.
Some copy and paste from a reuters article.
The USD sure didn't doesn't like the implications of rate cuts:
Dang, a couple more days like today and I could retire. Oh wait, I am retired.
Just keep buying, this ATH will be broken and you will be amazed at how high it goes lol.
Generally speaking when the dxy goes down the Q's go up. Lowering rates would help ease burdens on middle and lower class and unlock businesses.
Exactly.
And jump start home buying.
I was looking a couple of years ago but have been in a holding pattern since because the rates went up and my stocks went down. Might have to start looking again although the last time we were looking it was a buying frenzy. I made offers significantly above asking price and still got outbid.
I wouldn't be buying a new home with refi, i would be buying rental property with it. Just my .02
The housing market is an issue though with rental properties etc driving prices way up as well as rates. People are struggling to purchase homes as first time home owners and the prices keep going up, until the boomer era starts going away I don't think we see a change.
We invest in short term rental properties in, and around the area of the great smoky mountain national park.
Our last purchase was at a 3.2% rate.
At the 7% we've been stuck on, we can't buy another, and have the rental income cover the mortgage.
Can only imagine the number of prospective home buyers just sitting and waiting for powell to pull his head out, or run out his term.
That’s exactly what I was getting at, dropping rates is just going to drive prices even higher into the stratosphere. Everyone likes “number go up” but we can only play the fiscal irresponsibility game for so long, or at least that’s what logic and reason tell me, eventually there has to be a price to pay for insanity.
“Shut your damn dirty hippie mouth!” 🤣
I want lower rates for my own damn greedy reasons!
I don't want anything to do with the headache of rental property at this stage of my life. I would just pay outright for a house but if the interest rates are low it would make more sense to finance.
My only commercial paper/mortgage…2%…and I’d like ANOTHER!🤣
Pit Row
You have a property management company deal with the headaches.
On an 80/20 rate.
Our manager and Jenn have developed a good relationship over the years.
She likes tequila, so Jenn makes sure to gift her a bottle of high dollar stuff a few times a year, and a generous Christmas bonus that nobody else thinks about doing for her. Helps keep our places at the top of the places she recommends.
Much like back when I lived and worked in Texas. Gifting a case of beer would get you nice dividends.
But that's the kind of stuff I don't want to have to deal with.
Understood.
Most of the week sucked but Friday saved it.
I agree...I can't imagine why they would cut rates right now? They need to keep that arrow in their quiver for when they really need it.
I think Trump wants a red-hot economy to pay for the spending in the big beautiful bill...but I think cutting rates is a mistake at this point. In fact, for long term economic health, I'd almost rather they raise them again...just to slow things down and lead to a controlled reset.
Remember, the fed doesn't control long term mortgage rates...though historically mortgage rates have followed the fed funds and discount rates...my worry is that cutting rates (unnecessarily if you ask me) will boost the economy, and be inflationary, and will actually cause mortgage rates to go up in the short/mid term...
The housing market doesn't need lower rates...which will drive home values up even more...affordability is already an issue.
It isn’t about a red hot economy to pay for the “big beautiful bill” he wants sectors unlocked for business. You see, the r money being dropped into the USA right now by corporations is next level. It’s a matter of time before things kick off economically. He wants lower rates to allow business to boom. Jobs are byproduct, more spending is byproduct. It isn’t all about optics it is about business and moving forward
don't you mean an 1/8 point and the rates don't move?
I think he'll do just enough to keep his job. Not sure how anyone can argue for keeping
rates unchanged this long unless your goal is to hurt Trump. Almost all other significant countries
has lowered rates.
It was no secret that Trump was counting on an economic boom (and the increased tax revenue that would come with it) to pay for the spending in that bill. That's how he justified the additional spending in the bill. So he needs a red-hot economy to pay for it.
Anyway, we are both saying the same thing...I said "Trump wants a red-hot economy"...you said "he wants business to boom"...same thing...the question is if rates cuts are right/needed/justified given the current state of the economy. I'm not sure that they are? An overheated economy, built on already shaky economic fundamentals, just seems like recipe for disaster...I'd rather slower, more measured growth...
I can think of a lot reasons to keep rates high...
-Keep inflation dropping
-Strengthen the dollar
-(Hopefully) prevent congress from spending so freely (low rates make spending easier to justify)
-Encourage Americans to save money...higher rates mean higher yields on savings/cd's, bonds, etc.)
-Keeping rates higher will allow the fed to cut when the next recession comes.
I could probably think of a few more...but just off the top of my head.
While I have a lot of respect for your opinion in these matters.
I'm going to have to go with Milton Friedman on this in that inflation is from government spending. The government is the only entity that has a printing press. (well legitimate one anyway)
And I'm not sure that high interest rates keeps the government from spending more. BUT it does cost more for them to pay back the borrowed money at a higher interest rate. So I'm guessing they'll print more money today to pay back what they borrowed yesterday, leading to more inflation.
A weaker dollar would allow other countries to purchase more of our goods which should be good for our economy and also make it more expensive for us to buy foreign products, better for us.
I don't think it's just about saving money, but spending money on the right things, like buying a home vs being a forever renter.
But that's almost impossible to do with these high interest rates. But a better economy (maybe from a weak dollar?) and people will have good jobs make more money and be able to buy a house?
Maybe we could stave off that next recession with better policies instead of punishing the next generation with super high interest rates.
I'm no expert...and I'm happy to agree to disagree...but I appreciate the discussion, just a few comments on a few points:
High rates don't directly stop spending...but they do influence behavior...sure, I think you could say that the government might borrow more at higher rates, but those higher rates also discourage unnecessary spending elsewhere in the economy, slowing the demand-pull part of inflation. They also make it more constly for people (companies and consumers) to take on debt, which reduces the money flowing quickly through the economy. That will slow inflation without needing immediatly cut government spending, which is much much much more difficult politically. And if you ask me, our economy is propped up way to much by debt (how much would a new truck cost if they couldn't be financed for 8 years these days? How much money would GM make if they couldn't sell their cars on debt? Same for pretty much every sector of the economy...)
The Fed can't just print more money to cover interest payments without underminding its own credibilty...if the Fed starts monetizing debt aggressively, that could lead to hyper-inflation. Keeping the rates high tells the markets that the fed is serious about controlling inflation which helps control expectations. People and businesses are then far more likely to act in ways that naturally will help keep prices in check. A weak dollar does help exports...but it hurts imports and that feeds directly into inflation...so a weak dollar is double edged sword. Price stability is usually preferred because runaway inflation is much ahrd to fix than a temporary slowdown in exports.
Higher rates do make mortgages more expensive now...but if rates stay too low for to long we risk another housing bubble, which is far worse in the short-term affordability problem (look at what happening in 2020-21...and lower rates again-even if they don't go that low-will cause another spike in home prices). By keeping rates high, we are possibly delaying some purchases now, but increasing the chances we are avoiding a future boom-bust cycle...and boom/busts tend to hurt young buyers the most (they generally come in with less money down, and then are upside-down far more quickly, and thus more likely to walk away from the house).
And I will say that I absolutely agree that smarter fiscal policy is badly needed in this country. But that's a slow and challenging process in our politically divided country (congress can't even agree on whether men should be allowed to compete in womens sports...no way they will ever agree on fiscal policy). Where as the fed can use interest rates immediately to affect the economy and not have to wait on government solutions.
Titan is probably getting tired of hitting "mark as read" in his notifications as I have liked his posts this afternoon in this thread.
No need for me to repeat what he has said. To me he is speaking common sense.
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