When the market ascends at far greater rate than gain in productivity, and goes parabolic, a vicious correction always will follow.
Posted on 02/27/2018 8:36:53 AM PST by SeekAndFind
Federal Reserve chair Jerome Powell moved markets on Tuesday in his first appearance before lawmakers on Capitol Hill since his confirmation.
In response to questions from Rep. Carolyn Maloney (D-NY), Powell hinted that more aggressive action on raising interest rates from the Fed could be warranted this year.
“At the December meeting, the median [FOMC] participant called for three rate increases in 2018,” Powell said. “Now since then, what we’ve seen is incoming data that suggests a strengthening in the economy.”
Following this comment, stocks — which had been higher as Powell began speaking and answering questions — moved lower across the board with the major averages moving to losses on the day of about 0.2%. Bonds were also on the move, with yields pressing higher after falling on Monday, with the 2-year yield hitting 2.26% and the 10-year yield rising to 2.89%. Last week, the 10-year hit a four-year high of 2.95%.
“We’ve seen continuing strength in the labor market, we’ve seen some data that will — in my case — add some confidence to my view that inflation is moving up to target,” Powell added. “We’ve also seen continued [economic] strength around the globe, and we’ve seen fiscal policy become more stimulative.
“I think each of us is going to be taking the developments since the December meeting into account and writing down our new rate paths as we go into the March meeting and I wouldn’t want to pre-judge that.”
Markets, however, are clearly taking Powell’s comments as a sign that his view on the economy will be upgraded notably when the Fed’s next set of economic projections is released in just over two weeks.
The read-through from markets is that Powell will not be the only Fed official to move their view of the economy,
(Excerpt) Read more at finance.yahoo.com ...
Very easy to answer that. The previous FED chair, Janet Yellen was determined to keep Obama in power by keeping rates unrealistically and historically low -or- she was just scared out of her wits to raise rates for the fear of being accused of causing a recession.
The new FED chair seems to be more of a realist. The FED is notorious in creating unnecessary dislocations in the economy by being behind the curve.
The economy works best in the long run if left alone. Periodic mild recessions are good because it gets rid of unproductive assets and dead wood.
You put most of your retirement money in bond index funds at these ridiculous and artificial interest rates? I am so sorry, you got very bad financial advice from someone.
When the market ascends at far greater rate than gain in productivity, and goes parabolic, a vicious correction always will follow.
We both get it, FRiend!
I like Realistic interest rates and mortgage rates. Which currently should be 5-6% range. Both will move together. Ridiculously low interest rates cause bubbles in the assets market. Bubbles always burst creating horrible losses for asset holders.
Housing is already way over priced, and ahead of buyer’s income increases. Same thing happened 7 years ago. If you can’t sell your house, it is already over-priced. Sorry, that is the reality.
I like Realistic interest rates and mortgage rates. Which currently should be 5-6% range. Both will move together. Ridiculously low interest rates cause bubbles in the assets market. Bubbles always burst creating horrible losses for asset holders.
Housing is already way over priced, and ahead of buyer’s income increases. Same thing happened 7 years ago. If you can’t sell your house, it is already over-priced. Sorry, that is the reality.
We have had extremely low interest rates ever since Greenspan decided it was the proper response to 9-11. That’s about 7 years longer than just Obama.
Yep, late 2019 or early 2020 is the planned target for the next recession. Take Trump out by any means necessary.
We are TRYING to sell the house and have come off to what every estimate and appraisal says it is worth. The town the house is in truly has a very dead market. Also found out our real estate agent really made no effort to market the house.
Now we are in a position to have to do more maintenance to it (sink more $$ in to it) just to unload it because it has been empty for nearly a year. Sigh.
We simply want to bail out of it - WE CANNOT continue to make two housing payments per month. It has killed our savings.
What “free money”? Show me a free money mortgage. Please...
Put this property up for public auction if there are any competent real estate auctioneers operating in your area.
When you buy on a mortgage you also have no negotiating authority to get a good price on the home.
4% money is a close to free as I can say I ever experienced. That is lower than a passbook savings account from the 70s.
Great advice... when one is paying for an existing mortgage, AND paying a lease at our new location. Exactly what money am I suppose to save at this point? Sorry, but there is none.
As to your second claim regarding negotiating - that is blatantly false. Might a cash offer be somewhat more attractive to sellers, particularly those who are motivated by a schedule (such as our own position trying to get out from under a home where we no longer live) - certainly. But I’ve seen lots of successful negotiating that a mortgage (or lack thereof) made no difference.
My wife is a loan assistant/processor - so I’m pretty acquainted with how the system works.
Increasing interest rates are a sign of a rapidly expanding economy. If the Fed didn't do it during Obama's term it's because growth was more anemic than it has been under Trump.
When son in same situation he shortsold and rolled shortage into a new mortgage on 2d house. He was stuck, though. Agent can make all the difference, though. Best selling agency with their best salesperson. That’s normally a person who actually works. Too many don’t work at showing. Just wait for phone calls.
I do think a low slow interest rate increase is good for savings and for the housing market. So I agree with you
Right now the Fed wants to keep the economy from overheating and triggering a rise in the rate of inflation. They'll let interest rates slowly rise until the reach the point where the economy is still growing but inflation remains under control.
Man after my own heart, pal. There are plenty Fed defenders here but I am not one of them, like you I see. I agree that we don’t need Central Banks meddling with the economy to either contain inflation or help employment. The free markets work best. Especially not when inflation is driven by good economics like it is now, NOT massive monetary pumping. Agree also the mild recessions (and asset corrections) are good things.
Good to hear we have a realist then in the Fed.
If I am interested in a property I first arrange and pay for a zealous home inspection. The inspector documents everything deficient. Then the seller is required to disclose those deficiencies to other potential buyers. No mortgage company will write a loan unless those things are remedied. So I knock the price down for the spread. $40k off most times. Mean I know. But it works.
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