February: U.S. Federal Reserve raises prime rate by only 1/4 of 1% after months of more aggressive hikes to combat inflation

[Multicolored Lemur]

US announces smaller rate rise as inflation cools - BBC News

The US central bank announces its smallest rate rise in nearly a year.

www.bbc.com

“The Federal Reserve said it was raising its key rate by 0.25 percentage points.

“That marks the smallest increase since last March, after a series of aggressive rate hikes last year.

“But officials warned that they did not think they were finished raising rates, despite signs that price increases in the US are slowing.”

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This is good news.

This means that inflation in the United States is coming back down to Earth, although it’s still higher than it really should be.

 

[Multicolored Lemur]

US announces smaller rate rise as inflation cools - BBC News

The US central bank announces its smallest rate rise in nearly a year.

www.bbc.com

“The rate rise announced by the Fed on Wednesday [February 1st] increases its benchmark rate to a range of 4.5%-4.75% - the highest since 2007.”

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So, it’s a range. And the previous range was 4.25% - 4.5% before this rate hike.

This is the interest rate banks charge each other for short-term loans, often very short-term such as overnight.

Business loan rates are loosely based on this prime rate. And that’s why bumping the rate upward slows the economy just a little and thereby takes some of the bite out of inflation.

[consumer interests rates such as credit card rates are very loosely based on the prime! ! ! ]

 

[Multicolored Lemur]

US announces smaller rate rise as inflation cools - BBC News

The US central bank announces its smallest rate rise in nearly a year.

www.bbc.com

“ . . recent data showing inflation dropping to 6.5% last month [December 2022]. . ”

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This is the annualized rate — as if we were to extend the December rate for an entire year.

So, not ideal [which the Fed is saying is their 2% target]. But coming back down to Earth.

 

[AgnosticBoy]

Good reporting, Lemur.

I recently started dabbling in stocks and I'm noticing just how much impact interest rates have on business and stock markets. Increased interest rate causes borrowing to become more expensive (e.g. mortgages, student loans, etc.) and the reaction from the stock market is negative. Much of the stock market was up today which indicates that investors are anticipating that the worse of the inflation is over, and that we'll start trending down from there despite the rate increase today.

Read one report where the Feds stated that we should expect to see additional interest rate increases, but not by much:

“Inflation data received over the past three months show a welcome reduction in the monthly pace of increases,” Fed Chairman Jerome Powell said in his post-meeting news conference. “And while recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path.”

“We can now say I think for the first time that the disinflationary process has started,” Powell said, while also noting that it would be “very premature to declare victory or to think we really got this.”

Officials said they would determine the “extent” of future rate increases based on factors such as the effects so far of the rate hikes, the lags in which policy has an impact, and developments in financial conditions and the economy. Previously, the statement said it would use those factors to determine the “pace” of future hikes, a possible nod that the committee sees an end to the increases somewhere, or at least a continuation of smaller moves ahead.

Source: CNBC

 

[Multicolored Lemur]

Read one report where the Feds stated that we should expect to see additional interest rate increases, but not by much:

That’s how I understand it, too.

The Fed is signaling by their action that they will only have low increases of the prime rate, at least in the near-future. And the stock market has reacted favorably to this.

 

[Multicolored Lemur]

Source: CNBC

We have a gift potentially.

I’ve gathered from other threads that you tend to be more conservative and whereas I’m more liberal. I might be wrong about this, and certainly there are exceptions. And what’s a label anyway between friends anyway?

All the same, it’s cool that you’ve quote CNBC. I’m going to try to quote Fox News.

I’m going to do a google search:

site:FoxNews.com Fed interest rate

and see what I find.

 

[Multicolored Lemur]

It didn’t work.

And using the search on the Fox News site itself, I got articles including some I view as alarmist, in the Fox News way!

 

[Multicolored Lemur]

Google: fox news federal reserve interest rate

This worked.

This brought me to Fox Business News — FoxBusiness.com — and the following article:

Fed raises interest rates by a quarter point but signals inflation fight's not over | Fox Business

The Federal Reserve on Wednesday enacted its eighth consecutive interest rate hike as it attempts to cool inflation without triggering an economic recession.

www.foxbusiness.com

 

[Multicolored Lemur]

Fed raises interest rates by a quarter point but signals inflation fight's not over | Fox Business

The Federal Reserve on Wednesday enacted its eighth consecutive interest rate hike as it attempts to cool inflation without triggering an economic recession.

www.foxbusiness.com

. . . further slowing its aggressive campaign to cool the economy . . .

The widely expected move puts the key benchmark federal funds rate at a range of 4.5% to 4.75%, . . .

"The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time," the FOMC said in its post-meeting statement, unchanged from December.

[ FOMC = Federal Open Market Committee ]

Stocks initially fell on the news, with the Dow Jones Industrial Average shedding more than 300 points.

However, markets roared back during Fed Chairman Jerome Powell's press conference when he acknowledged the "disinflationary process has started."

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All this is accurate reporting of the news.

At least it is to my non-expert ears. I’m not an economist. I’m interested in the subject, and I think we as lay persons should be able to follow it, just like many of us are able to follow a baseball game.

 

[Multicolored Lemur]

Fed raises rates a quarter point, expects 'ongoing' increases

The Federal Reserve on Wednesday released its decision on interest rates following its two-day meeting.

www.cnbc.com

The consumer price index declined 0.1% in December on a monthly basis and is up 6.5% from a year ago – down from the peak of 9% last summer but still well above where the Fed feels comfortable.

=======================

Fed raises interest rates by a quarter point but signals inflation fight's not over | Fox Business

The Federal Reserve on Wednesday enacted its eighth consecutive interest rate hike as it attempts to cool inflation without triggering an economic recession.

www.foxbusiness.com

Government data released earlier this month showed that the consumer price index fell 0.1% in December from the previous month, although it remains up 6.5% from the same time one year ago.

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This is a problem!

Both CNBC and Fox Business seem to be saying that prices actually went down a smidge in December. I think they meant to say the rate of inflation went down a smidge.

I don’t think we have slid from 9% inflation this past Summer to zero and in fact slightly negative inflation [which is not a good thing].

And I’m going to go further and say it’s language arts types who occasionally make mistakes when reporting numbers.

Just like it takes many years to become a really first-rate baseball reporter, it takes many years to become a really first-rate economics reporter. With sports, we the viewing public are willing to pay for quality reporting. With other topics, not as much.

Or, I might be wrong! I’m more than happy to acknowledge that possibility.

But this is confusing.