Federal Reserve, the Economy and CD Rate Forecast - May 10, 2022
At last week’s FOMC meeting, the Fed announced its first 50-bp rate hike since 2000. At the post-meeting press conference, Fed Chair Powell also indicated that this will likely be the start of a series of 50-bp rate hikes with two more occuring in June and July. Fed Chair Powell dismissed the possibility of a 75-bp rate hike by saying that the “75 basis point increase is not something the committee is actively considering.” The rate hike decision in September will likely be based heavily on how inflation and the economy evolve over the next four months. If inflation slows over those months, the Fed is likely to return to 25-bp rate hikes. If inflation accelerates over those months, a 75-bp rate hike becomes more likely.
Another announcement by the Fed at last week’s meeting was that Quantitative Tightening (QT) will begin in June. This QT involves the Fed reducing its asset holdings (also called the Fed’s balance sheet.) Opposite of Quantitative Easing (QE), QT will take money out of the financial system which should put upward pressure on interest rates.
Large rate hikes along with QT are clear signs that tighter monetary policy is accelerating, and that is contributing to intense stock market volatility and a stock market (as measured by the S&P 500) that’s down by more than 16% this year. Fears are growing that there will be a recession. Out of the 14 Fed tightening cycles since 1950, 11 have resulted in recessions.
Recessions typically result in lower inflation and higher unemployment. The Fed then steps in to lower policy rates. If we see stagflation in which inflation remains elevated as the economy slows and unemployment rises, the Fed won’t be able to lower rates. This could be a repeat of the 1970s.
With inflation data being so critical this year to the Fed’s policy decisions, each new monthly inflation report has additional importance. The next inflation report will be released on Wednesday. It’s the Consumer Price Index (CPI) for April, and the consensus is for a month-over-month increase of 0.2% (up 8.1% year-over-year) in the CPI and a month-over-month increase of 0.4% (up 6.1% year-over-year) in the core CPI (via Calculated Risk). An upside surprise in inflation will add to the worry that the Fed is behind the curve on inflation and won’t easily be able to bring inflation back to its 2% target. A few months of this may result in a 75-bp Fed rate hike for later this year.
Treasury Yields
In the last week, Treasury yields for durations from one year to five years had sizable declines. The 2-year yield had the largest decline, falling 16 bps in the last week. However, both the 1-month and 30-year Treasury yields had gains of 9 bps. The 10-year yield had a slight gain of 2 bps while the 3-month yield had a slight decline of 2 bps.
With the 10-year yield rising while the 2-year yield falling, the 10y-2y spread (the difference between the 10-year and 2-year yield) increased 18 bps, from +19 bps to +37 bps. A negative yield curve, especially a negative 10y-2y spread, raises the concerns that the economy will fall into a recession in the next couple of years. Some economists put more weight on the spread between the 10-year and 3-month yields (the 10y-3m spread) for predicting future recessions. This recent San Francisco Fed paper is the latest research to support 10y–3m spread as the better indicator. That spread continues to be much more positive than the 10y-2y spread, and it increased from last week, rising from 206 bps to 210 bps.
Treasury bills continue to be attractive as an alternative to short-term CDs. The 3-, 6- and 12-month T-bills have yields above the best CDs with similar durations. For longer terms, Treasury yields are still in front of CD yields with similar maturities. However, online bank CDs and credit union CDs are slowly catching up. There are now some direct CDs with yields that are close to Treasury yields.
Odds of Fed Rate Hikes
For the June meeting, the odds of at least a 50-bp rate hike is 100.0%, which is the same as last week. However, the odds of at least a 75-bp rate hike has declined from 27.1% last week to 10.2% today. The Fed Chair’s dismissal of a 75-bp rate hike is definitely reflected in these odds.
For the July meeting, the odds of at least two 50-bp rate hikes by then have declined slightly from 100.0% to 99.2%. The odds that there will be a 75-bp rate hike have declined from 34.2% to 11.8%.
For the September meeting, the odds of at least three 50-bp rate hikes by then have fallen from 82.9% to 52.0%. The odds are higher that the Fed returns to 25-bp rate hikes by September instead of moving to 75-bp rate hikes. The odds of at least one 75-bp rate hike have fallen from 26.3% to 5.4%.
For the December meeting, odds are high that the Fed returns to 25-bp rate hikes after two 50-bp rate hikes. The odds that there will be more than two 50-bp rate hikes by December have fallen from 84.6% to 51.8%.
For the July 2023 meeting, the odds point to only one or two 25-bp rate hikes in the first half of 2023.
These federal funds rate odds are based on the CME FedWatch tool. The CME FedWatch tool lists implied probabilities of future target federal funds rate hikes based on the Fed Funds futures market.
The following numbers are based on Daily Treasury Yield Curve Rates and the CME Group FedWatch.
Treasury Yields (Close of 5/10/2022):
- 1-month: 0.57%, up 9 bps from 0.48% last week (0.02% a year ago)
- 3-month: 0.89%, down 2 bps from 0.91% last week (0.02% a year ago)
- 6-month: 1.44% down 1 bp from 1.45% last week (0.04% a year ago)
- 1-year: 2.01%, down 15 bps from 2.16% last week (0.05% a year ago)
- 2--year: 2.62%, down 16 bps from 2.78% last week (0.16% a year ago)
- 5--year: 2.91%, down 10 bps from 3.01% last week (0.80% a year ago)
- 10-year: 2.99%, up 2 bps from 2.97% last week (1.63% a year ago)
- 30-year: 3.12%, up 9 bps from 3.03% last week (2.32% a year ago)
Fed funds futures' probabilities of future rate changes by:
Jun 15, 2022 - up by at least:
- 50 bps: 100.0%, same as last week
- 75 bps:10.2%, down from 27.1% last week
Jul 27, 2022 - up by at least:
- 75 bps (1 50-bp + 1 25-bp): 100.0%, same as last week
- 100 bps (2 50-bp): 99.2%, down from 100.0% last week
- 125 bps (1 50-bp + 1 75-bp): 11.8%, down from 34.2% last week
Sep 21, 2022 - up by at least:
- 100 bps:(1 50-bp + 2 25-bp): 100.0%, same as last week
- 125 bps (2 50-bp + 1 25-bp): 99.6%, down from 100.0% last week
- 150 bps (3 50-bp): 52.0%, down from 82.9% last week
- 175 bps: (2 50-bp + 1 75-bp): 5.4%, down from 26.3% last week
Dec 14, 2022 - up by at least:
- 150 bps (1 50-bp + 4 25-bp): 100.0%, same as last week
- 175 bps (2 50-bp + 3 25-bp): 97.5%, down from 100.0% last week
- 200 bps (3 50-bp + 2 25-bp): 51.8%, down from 84.6% last week
- 225 bps (4 50-bp + 1 25-bp): 6.4%, down from 31.6% last week
- 250 bps (5 50-bp): 0.1%, down from 5.1% last week
Jul 26, 2023 - up by at least:
- 200 bps: 94.3%, down from 99.3% last week
- 225 bps: 74.3%, down from 93.3% last week
- 250 bps: 42.0%, down from 74.1% last week
- 275 bps: 15.2%, down from 43.3% last week
Deposit Rate Changes and Forecasts
CD Rates
As the Fed embarks on a series of 50-bp rate hikes, online CD rates are surging higher while online savings account rates are mostly just inching up. Most banks that are raising CD rates appear to be seeing the benefit of attracting deposits into CDs with today’s rates, which will likely appear low in just a few more months.
For the popular online banks, the most noteworthy CD rate increases occurred last week at Live Oak Bank. Its CD rates increased between 50 and 75 bps. Its 5-year CD had the largest rate increase (2.00% → 2.75% APY), but even its shorter-term CDs had substantial rate gains. These include the 6-month (0.75% → 1.25% APY), 12-month (1.25% → 1.75% APY) and 18-month (1.40% → 2.00%).
For the major online banks, both Capital One and Ally Bank both had significant CD rate increases.
Capital One increased the rates of its long-term CDs for terms of 2-year (1.60% → 1.70% APY) to 5-year (2.15% → 2.25% APY).
Ally Bank’s 5-year CD APY finally has reached 2%, with an increase from 1.50% to 2.00% last week. The last time it was higher was March 2020 when it was 2.15%. Even though Ally’s early withdrawal penalties are mild, Ally’s shorter-term CDs are more appealing. Noteworthy ones that had rate increases last week include the 20-month Select CD (1.50% → 1.75% APY), 14-month Select CD (1.25% → 1.50% APY) and the 11-month No Penalty CD (0.50% → 0.60% APY). Any Ally customer who has existing No Penalty CDs should consider closing them and opening new No Penalty CDs with the higher rate.
Most of the major credit unions have fallen a little behind the online banks. Alliant Credit Union is starting to catch up. Last week, it made significant CD rate increases. Most noteworthy were its 5-year (2.00% → 2.25% APY), 18-month (1.10% → 1.75% APY) and its 1-year (1.00% → 1.25% APY).
Teachers FCU is also starting to catch up, with its 5-year CD rate being further ahead on the competitive scale (2.00% → 2.50% APY).
USALLIANCE Financial Credit Union appears intent on keeping its 18-month CD Special competitive (1.75% → 1.95% APY). Just two weeks ago, it did a major rate increase on its 11-month No Penalty CD (0.65% → 1.25% APY).
The above CD rates don’t come close to the CD rates at the Department of Commerce FCU. They remained on top, and they increased their lead slightly with a few small rate increases: 5-year (3.03% → 3.05% APY), 2-year (2.80% → 2.81% APY), 1-year (2.12% → 2.15% APY), and 6-month (1.35% → 1.44% APY).
The online CD average yields surged in April. The gains were the largest since I started tracking these averages in 2017.
In April, the average online 1-year CD yield increased 27.5 bps to 1.010%. For the first four months of 2022, the average online 1-year CD yield has almost doubled, rising from 0.508% to 1.010% (a gain of 50.2 bps.)
The average online 5-year CD yield increased even more. In April, the average increased 46.5 bps to 1.696%. For the first four months of 2022, the average online 5-year CD yield has almost doubled, rising from 0.857% to 1.696% (a gain of 83.9 bps.)
These averages are based on the 5-year Online CD Index and 1-year Online CD Index which are the average yields of ten online CD accounts from well-established online banks.
I’m only including one to three CD rate changes per institution to avoid an overload of data. All percentages listed below are APYs.
- Dept of Commerce FCU (5y 3.03% → 3.05%, 1y 2.12% → 2.15%)
- First National Bank of America (5y 2.05% → 2.80%, 1y 1.30% → 1.76%)
- Merrick Bank (5y 2.61% → 2.76%, 18m 1.71% → 2.01%, 1y 1.51% → 1.76%)
- Live Oak Bank (5y 2.00% → 2.75%, 18m 1.40% → 2.00%, 1y 1.25% → 1.75%)
- Popular Direct (5y 2.30% → 2.70%, 2y 1.90% → 2.10%, 1y 1.20% → 1.55%)
- Seattle Bank (5y 1.20% → 2.53%, 1y 0.75% → 1.71%)
- Teachers FCU (5y 2.00% → 2.50%, 18m 1.00% → 1.25%)
- Rising Bank (3y 2.15% → 2.35%, 2y Jbo 2.10% → 2.25%, 1y 1.50% → 1.45%)
- Credit One Bank NA (5y 2.20% → 2.30%, 1y 1.55% → 1.75%)
- TIAA Bank (5y 2.00% → 2.30%, 18m 1.30% → 1.60%)
- Capital One (5y 2.15% → 2.25%, 2y 1.60% → 1.70%)
- Alliant CU (5y 2.00% → 2.25%, 18m 1.10% → 1.75%, 1y 1.00% → 1.25%)
- CFG Bank (5y 2.00% → 2.25%, 12m 1.25% → 1.35%)
- AgFed CU (2.00% → 2.25%, 1y 0.90% → 1.05%)
- My eBanc (3y 1.45% → 2.22%, 1.00% → 1.31%, 11m Flex 0.55% → 0.85%)
- Evansville Teachers FCU (5y 2.00% → 2.15%, 2y 1.40% → 1.50%)
- Luana Savings Bank (5y 1.97% → 2.07%, 1y 1.41% → 1.51%)
- First Internet Bank (5y 1.81% → 2.02%, 1y 1.11% → 1.26%)
- Limelight Bank (3y 1.60% → 2.00%, 1y 1.20% → 1.50%, 6m 0.70% → 1.00%)
- Ally Bank (5y 1.50% → 2.00%, 14m 1.25% → 1.50%, 11m NP 0.50% → 0.60%)
- Credit Human CU (5y 1.90% → 2.00%, 1y 1.20% → 1.30%, 1y Liq 0.90% → 1.00%)
- USALLIANCE Financial CU (18m Spc 1.75% → 1.95%)
- Service CU (5y 0.85% → 1.90%, 18m 0.50% → 1.40%, 1y 0.50% → 1.00%)
- My Banking Direct (3y 1.40% → 1.70%, 1y 1.05% → 1.50%)
- TotalDirectBank (5y 0.50% → 1.70%, 1y 0.50% → 1.30%)
- BankUnitedDirect (3y 0.10% → 1.65%, 2y 0.10% → 1.65%, 1y 0.15% → 1.20%)
- Michigan State Univ FCU (4y 1.55% → 1.60%, 6m Jbo 0.80% → 0.95%)
- M.Y. Safra Bank (18m 0.81% → 1.52%, 1y 1.32% → 1.46%)
- LendingClub Bank (1y 1.00% → 1.30%)
- HSBC (2y 1.01% → 1.26%, 1y 0.75% → 1.01%, 6m 0.50% → 0.65%)
- Ivy Bank (1y 0.60% → 1.15%)
I’ll have more discussion of the rate changes in my CD rate summary on Wednesday.
Savings, Checking and Money Market Rates
There was a slight acceleration of online savings account rate increases last week when the Fed did its first 50-bp rate hike. I expect to see more acceleration after the next two 50-bp Fed rate hikes that are anticipated for June and July.
More banks reached 1% last week. The savings accounts of the three noteworthy ones include Bask Bank Interest Savings (0.80% → 1.25% APY), First Foundation Bank Online Savings (0.65% → 1.00% APY), and My Banking Direct High Yield Savings (0.77% → 1.00%). Bask Bank Interest Savings (1.25% APY) is now the highest rate of a liquid account that doesn’t have small balance limitations or direct deposit requirements.
In the last two rate-hiking cycles, Emigrant Bank’s online divisions have been very aggressive with their online savings account rates. Its three online divisions did have rate increases last week, but the new rates are far behind the rate leaders. The three online savings accounts include EmigrantDirect Savings (0.35% → 0.75% APY), DollarSavingsDirect Savings (0.35% → 0.75%) and MySavingsDirect Savings (0.25% → 0.50% APY).
One of the online banks with a long history of competitive rates on its online savings account is SFGI Direct. I first wrote about its online savings account in 2009, and since that time, SFGI Direct has kept the rate competitive. They rarely have been the highest, but they have generally been above the average rate for online savings accounts. The SFG Direct Savings account had its first rate increase since January 2019, with the rate gaining 20 bps to 0.71% APY.
The average online savings account rate had its largest monthly gain since 2019. However, the gain is much smaller than the CD rate gains.
The average online savings account rate increased 4.0 bps in April, rising from 0.501% to 0.541%. So far this year, the average has increased 8.5 bps.
The average online savings account rate fell slightly in 2021, falling 5 bps from 0.51% to 0.46%. That decline occurred in the first half of 2021. There was no net change in the average from June 1st to January 1st.
Our Online Savings Account Index tracks the average rate of ten well-established online savings accounts.
Below are examples of important savings, checking and money market rate changes in the last week. As is the case with the CD rates, I’ve included only rate changes from the online savings accounts that DA readers would be most interested in. All percentages listed below are APYs.
- Bask Bank Interest Savings (0.80% → 1.25%)
- First Foundation Bank Online Savings (0.65% → 1.00%)
- My Banking Direct High Yield Savings (0.77% → 1.00%)
- Luana Savings Bank Insured MM ($750k+ 0.90% → 1.00%)
- Ivy Bank High-Yield Savings (0.70% → 0.85%)
- CFG Bank High Yield MM (0.80% → 0.82%)
- Citizens Access Online Savings (0.50% → 0.75%)
- Popular Direct High Rise Savings (0.50% → 0.75%)
- DollarSavingsDirect Savings (0.35% → 0.75%)
- EmigrantDirect Savings (0.35% → 0.75%)
- SFGI Direct Savings (0.51% → 0.71%)
- TotalDirectBank Direct MMDA (0.50% → 0.60%)
- Wings Financial CU High YIeld Savings (0.45% → 0.55%)
- MySavingsDirect Savings (0.25% → 0.50%)
Economic and Deposit Rate Scenarios for 2022 and 2023
Based on the March Summary of Economic Projections (SEP) dot plot which shows the anticipated federal funds rates of each of the 16 FOMC members, I can summarize these into two scenarios of how rates evolve through 2023. Based on last week’s Fed meeting (which did not include a release of the SEP), it appears the second scenario is more likely to occur. The following will be updated with new scenarios after the next Fed meeting on June 14-15, which will include a release of the SEP.
Note, the dot plot includes rates for 2024 and for the “longer run.” For my scenarios, I’ve decided to focus just on 2022 and 2023. In my opinion, there’s too much uncertainty for 2024 and future years.
My first scenario is based on the median forecast for all 16 Fed officials who participated in the SEP. My second scenario is based on the median forecast for five of the Fed officials with the highest rate forecasts.
My two Fed rate hike scenarios through 2023:
- 2022: 7 rate hikes, 2023: 3 or 4 rate hikes (2yr gain of 250 to 275 bps)
- 2022: 9 rate hikes, 2023: 4 rate hikes (2yr gain of 325 bps)
Note, a rate hike for this analysis is considered a hike of 25 bps. It’s possible that there will be rate hikes of 50 or more basis points. For simplicity, one rate hike of 50 bps may be called two rate hikes. Thus, seven rate hikes in 2022 could be seven 25-bp rate hikes or two 50-bp rate hikes and three 25-bp rate hikes. Since there are only six more scheduled FOMC meetings in 2022, nine rate hikes would likely be two 50-bp rate hikes and five 25-bp rate hikes (one of which has already occurred.)
One thing to note is that each new SEP has brought higher rates in the forecasts. The following shows how the rate forecasts have evolved in the last year. One year ago, the SEP forecasts showed no rate hikes through 2023. Now they show 10 or 11 rate hikes through 2023. So this trend suggests that there will be more rate hikes than shown by today’s SEP. Also, it shows that you shouldn’t have too much faith in these forecasts.
SEP federal funds rate median forecasts from previous FOMC meetings
- Mar 2021: 2022: 0 rate hikes, 2023: 0 rate hikes
- Jun 2021: 2022: 0 rate hikes, 2023: 2 rate hikes
- Sep 2021: 2022: 0 or 1 rate hike, 2023: 2 or 3 rate hikes
- Dec 2021: 2022: 3 rate hikes, 2023: 3 rate hikes
- Mar 2022: 2022: 7 rate hikes, 2023: 3 or 4 rate hikes
How fast will online savings account rates increase?
Based on the 2015-2018 Fed rate hiking cycle, it may take a few Fed rate hikes before we see widespread and significant gains in online savings account rates. Widespread online savings account rate hikes didn’t start until the middle of 2017. In 2017, the third Fed rate hike occurred in March and the fourth occurred in June. After that third Fed rate hike, we finally saw widespread rate increases on online savings accounts. Those increases were small, but they finally started.
After the fourth Fed rate hike in June 2017, the target federal funds rate range was 1.00%-1.25%. Online savings account rates then started to track the federal funds rate. You can see how the average online savings account rate tracked the federal funds rate in our Online Savings Account Index chart. During the period from June 2017 through 2018 when the Fed raised rates six times, the average online savings account tracked somewhat close to the upper range of the target federal funds rate. The closest it tracked was during the first three of these six rate hikes. In the last three rate hikes, the average online savings account rate didn’t keep up with the Fed rate hikes. The upper range of the target federal funds rate peaked at 2.50% in December 2018. The average online savings account rate peaked at 2.23% in February 2019.
The first thing that’s different this time is that deposit rates are much lower than they were in 2015. The major online savings account rates were close to 1%. Today, they’re close to 0.50%. The result of that difference is that it may only take two Fed rate hikes rather than four before we see online savings account rates start inching up.
The second thing that’s different this time is high deposit levels and weak loan demand. This is slowly normalizing, and this condition isn’t shared by all banks and credit unions. As we have seen in the last two months with the credit card banks, loan growth has been enough to spur the online divisions of these credit card banks to raise deposit rates.
The third thing that’s different is high inflation that has been rising more than expected. The March SEP showed that Core PCE is forecast to rise 4.1% in 2022. That’s up from 2.7% from the December SEP forecast. The January year-over-year Core PCE was 5.2%. In 2017 and 2018, monthly year-over-year Core PCE never exceeded 2%. High inflation could result in deposit rates that move up faster.
Online savings account and CD rates in 2022 and 2023
If online savings account rates track the federal funds rate as they did in 2018, online savings account rates should be close to the federal funds rate. For scenario #1, that’s between 2.50% and 3.00% by the end of 2023. For scenario #2, that’s between 3.25% and 3.50% by the end of 2023.
In 2018, the highest nationally available CD rates were generally in the low 4% range. One example is the 4% APY 5-year CD at Connexus Credit Union. It lasted less than a month during November 2018. The top 5-year CD yields during 2018 and 2019 at both Navy Federal and PenFed was 3.50% APY. These yields lasted only about a month.
Based on the top 2018 and 2019 CD rates, we could see 5-year CD rates in the range of 4.0% and 4.50% for scenario #1 and 4.75% and 5.00% for scenario #2. Peak 5-year rates could be lower if there are signs of economic weakness. In this case the spread between short-term and long-term rates shrinks and may even go negative. The result is that long-term CD rates won’t be higher than online savings account rates.
It’s wise to remember that no one can predict future interest rates. So if you want to keep things simple, a CD ladder of long-term CDs is always a useful strategy for your safe money. If you’re worried about being locked into a low-rate CD if rates start rising, choose long-term CDs with early withdrawal penalties of no more than six months of interest.
CD Rate Trends
The above graph shows the rate trends of the average CD rates. These average rates are based on all the rate data that we have collected over the years. They include rates from both brick-and-mortar banks and credit unions, in addition to online banks. Since brick-and-mortar banks and credit unions greatly outnumber online banks, these averages can be considered brick-and-mortar bank averages.
This is an interactive graph. You can choose the term of the CDs (from 3 months to 5 years) and the look-back period (from 3 months to 5 years).
As you can see in the graph, average CD rates for all terms plunged in 2020. Rates fell at a slower pace in 2021. For most terms, CD rates bottomed out at the end of 2021. The 3- and 6-month CD rates bottomed out in January or February of 2022. Rates are now slowly inching up.
1. The current round of Fed rate increases, combined with the current reckless fiscal policy in Washington may be creating an illusion that the higher bank deposit rates are putting you ahead of the game when in fact you are slipping further behind. I'm suggesting that your real rate of return on your bank deposits may be getting worse not better even though your deposit rates might be increasing.
2. There is no purer democracy than free markets where people are free to use their own money (the fruits of their own endeavors) to vote for that which is in their own best interests. To that end not the government but rather the marketplace should be determining interest rates based on the collective monetary votes of the market participants; the Fed should not be manipulating rates. In the current state of the US economy, for every person that benefits from higher interest rates -- in the short run at least -- there are a dozen who are hurt by them. In an ideal economy, the government should not be making decisions about who should benefit and who should be hurt. Rates should be set by the collective monetary votes of borrowers and lenders, consumers and investors each acting in their own interests.
3. A repeated theme in some comments here chastises the Fed for not rewarding investors in "riskless" investments. As has been mentioned in the past this is not the mission of the Fed. Nor do I think it should be. In addition to the aforementioned picking of winners and losers, which I think is not a desirable function of government, forcing arbitrarily high interest rates for the sole purpose of benefiting those who keep their money in "riskless" investments such as bank accounts would be a disguised form of welfare. It would also reward the absence of risk taking and therefore disincentivize risk taking which would be an impediment to economic growth. Setting an arbitrary return on such investments rather than allowing market forces to determine the rates would be redistribution of wealth by government edict. I'm not opposed to welfare for those who genuinely need it, that's part of a civil society. (If only! Maybe you have heard about the $100 BILLION plus in "Covid relief" fraud.), But welfare should always be transparent and paid through an established and visible AND ACCOUNTABLE welfare program not through a corruptible stealth perversion of free markets by government intervention.
4. Rather than trying to cajole the Fed into deviating from its legal mandate, which I think is a losing game, I think the best strategy for savers and investors in this government manipulated economy is to adjust investment strategy so that it is less reliant on so-called "riskless" investments with negative real returns (such as bank accounts) and more diversified to include riskier investments with potentially higher returns. I understand aversion to taking risk, I am very conservative in that regard too, but the economy is so far out of control of the people and in control of the government I don't think there is any choice at this point in time. The options are to hold "riskless" assets and risk losing your buying power to government induced inflation (regardless of the nominal rate), or to diversify with transparently risky investments and at least have a chance of maintaining the buying power of your savings. Either way you are taking risks. And those risks are severely exacerbated by the government's reckless and corrupt spending.
5. If you oppose this government command economy, and are concerned that it threatens your economic security, the best way to address it is with your vote at the ballot box not by trying to "fight the Fed." The government holds all the cards (or should I say all the money). You cannot defeat it at the market level because they control the currency. You should not have to spend your time worrying about how to protect your own money from your own government. That's not freedom. Politics is the only way to reduce that control. To say that there is no difference between political candidates' approaches to the economy and it doesn't matter who you vote for they are all the same is clearly wrong. I don't know of any better proof of that than the stark change in the economic approaches and results between the current presidential administration and the last one. How could the divergent results of those polar opposite approaches be any more clear than has been demonstrated over the last 16 months?
6. You can get as fancy as you want in your analysis but I think when it comes to the economy there is a simple binary choice. Go with the Democrats and you get draconian taxes and regulation, the Green New Deal war on affordable energy, war on (US) national security through elimination of national borders and projecting weakness to our enemies, Orwellian censorship of opposing ideas and free speech through federal truth bureaus that would make Xi Jinping blush, being forced to pay off other peoples' personal debt and an America Last foreign policy through leading from behind. It's Obama's "Fundamentally transform America." Now we know what it means loud and clear ... In short it's a place where the entire concept of making America great again is explicitly banned and putting America and Americans first is evil ... Result? The economy we have right now with the Democrats in control of the entire federal government. No need to review history to find similar examples like the Carter stagflation of the '70s, we are seeing it first hand in living color right now all over again in the present only worse. It's as if nothing was learned. I don't think overthinking it adds any value to that analysis. It couldn't be any more clear.
If you don't like what is happening to your personal wealth and being in a position where you are forced to increase the risk in your portfolio in order to attempt to avoid losing it, there is only a limited amount you can do to fix the issues in the marketplace since it is government policy that is the problem, not the markets themselves. The remedy lies in getting out to vote. If you're not happy vote the errant policy makers out.
I think the Democrats are going to have a tough time in November. Even the reprehensible political stunts they try to pull like creating distractions with the Supreme Court leak on abortion and the illegal demonstrations at the homes of conservative Supreme Court Justices to attempt to intimidate them and the likely coming coast to coast riots from the left like they did in 2020 to try to intimidate voters and to get the headlines off of their epic policy failures isn't going to work. I don't think Mob rule will work for the Democrats again this time. Who is going to vote for Democrats after losing 30% of their net worth under their policies? People are angry and have had enough. And this time they will be showing up to vote in person ... no pandemic absentee voting/dropbox shenanigans this time (Unless there is another miraculously timed catastrophe in this election year...I don't know like maybe Putin drops a nuke?...and the Blue states mandate lockdowns again like they did with the miraculously timed China virus in the 2020 election year.). PS there are suddenly stories all over the Democrat press about a coming Covid apocalypse in the fall...just in time for the midterms.
The bottom line is we have to stop the government from taking more of our money and spending it the way they want to, so that we can keep more of our own money and spend it the way we want to. That's the quintessential feature of free markets and indeed of freedom itself. The reason we are in this economic mess to begin with is because the government taxes too much and spends too much and takes away our ability to enjoy the freedom afforded by deciding how to spend the fruits of our own endeavors. We have gone from the founding principles of an individual-centric society to a government-centric society, the very result that the founders feared most because they lived through it and rejected it. Choose as you like, but I choose to oppose anything that supports the unnecessary diminution of my personal freedom and I think that one party in particular has become all about that.
The bigger the government the smaller the citizen.
=Bonus=
I got a belly laugh listening to Biden stumble through his teleprompter fiscal policy speech still pushing this fossilized notion that people should vote for his agenda because "No one earning under $400,000 a year will pay an extra penny in taxes." Cracked me up! Americans are already paying $7,000 a year extra for inflation, but not "an extra penny in taxes!" A lot of people making way under $400,000 a year are ALREADY paying DOUBLE, TRIPPLE OR MORE taxes than they paid before Biden because of the Biden inflation tax. Then he boasts about how he reduced the deficit compared to the Trump deficit! My coffee almost came out of my nose! You can't make this up! The only reason it is reduced is because his "Build Back Better" out-of-control government welfare state spending agenda FAILED TO PASS. Had it passed as he attempted to do the deficit would have not only been much much larger than it was in the past, but very likely CATASTROPHIC for the economy triggering even more and probably unrecoverable inflation. AND HE IS STILL PUSHING IT!!! As it already stands now the economy is teetering on the brink because of government overspending and over taxing and every single proposal from his administration adds more of the same wrong "solutions" that got us into this hot mess in the first place. For over a year, as the economic hole he digs gets deeper and deeper, Biden has been saying that the way to reduce inflation caused by too much government spending is more government spending. And the way to grow the economy and create more jobs is to raise taxes when there are still more than a million people not working than there were in 2019. And instead of undoing all the things that he did to cause energy prices to skyrocket in the first place his plan is to bring down energy prices by crashing the economy? DOH! Why didn't I think of that?! Who is the audience for this stuff?! This administration's fiscal policy contains more red flags than the Chinese Olympics!
Have a great day.
The absolutely worst death toll of any country in the world.
And that's with the restrictions that were put into place.
Guess a few million more Americans should have died to prevent "disatrous results fo the country".
The pandemic already created those disastrous results.
People were dropping like flies in the meat packing plants.
Yet, the government was supposed to just stand by and do nothing?
I may be taking a financial hit due to the pandemic.
But, at least I'm still alive to complain about it.
The absolutely worst death toll of any country in the world."
. . . 'Tis true and 'tis pity 'tis true:
"The CDC says that, as of Dec. 4, the weekly COVID-19 death rate among unvaccinated adults was 9.74 per 100,000 population, and the rate was 0.1 per 100,000 population for people 18 and older who were fully vaccinated with a booster dose."
https://www.factcheck.org/2022/02/scicheck-latest-cdc-data-unvaccinated-adults-97-times-more-likely-to-die-from-covid-19-than-boosted-adults/
I suppose this is what happens when folks are fed disinformation, spread by those who pose as the ministry of truth with an all seeing eye for fake news. .
First, more Americans died after Biden and the Trump vaccines, than before.
Second, people worldwide still haven't figured out a P100 or N100 permanent respirator face mask, offers good protection. Of all the news stories I have seen where people want to force others to wear masks, I can't recall ever seeing one of those people, wearing a respirator mask. The good thing about the end of the mask mandate, is that people are now able to choose to actually protect themselves on airplanes by wearing respirator masks, where the FAA had prohibited them for two years, forcing people to wear less effective masks.
I have an affinity, for people who manage to take care of themselves. It is generally easy, in America.
The original vaccine was created by a German company with clinical testing/productionsupport from Pfizer.
The US government was late to the game on this one.
Probably because Trump said that it would go away on it's own.
Here's a direct quote.
Trump, May 8: Well, I feel about vaccines like I feel about tests. This is going to go away without a vaccine. It’s going to go away, and it’s — we’re not going to see it again, hopefully, after a period of time. You may have some — some flare-ups and I guess, you know, I would expect that. Sometime in the fall, you’ll have flare-ups maybe. Maybe not. But according to what a lot of people say, you probably will. We’ll be able to put them out. You may have some flare-ups next year, but eventually, it’s going to be gone. I mean, it’s going to be gone.
You know, there are some viruses and flus that came, and they went for a vaccine, they never found the vaccine, and they’ve disappeared. They’ve never shown up again. They got — they die too, like everything else. They die too.
(see: https://www.hartfordfunds.com/practice-management/client-conversations/real-return-on-12-month-cds.html#:~:text=From%2012%2F31%2F02%2D,Labor%20Statistics)%20was%202.32%25)
They take the average CD rate.
Which includes the low rates at the big banks.
Until last year, I seriously doubt that anyone with a brain was losing to inflation.
What do expect from a funds outfit?
1. Indeed higher deposit account rates are putting you ahead, in fact, 100s of percent ahead. Inflation is a problem but affect each differently and so real return cannot be generally applied. For example, if you already own your home and don't drive you're already way ahead. However, if you rent, drive, or going to college then you need the Fed to raise rates.
2. "Rates should be set by the collective monetary votes of borrowers and lenders, consumers and investors each acting in their own interests." Must admit this sounds like communism and has never been done this way in the US. I think we all agree that the Big Banks and the Big Money pretty much are in control, so we can only hope that the regulations and mandates put in place are enforced to help the rest of us. Should instead advocate to repeal Citizens United v FEC.
3,4. Investing in CDs or savings accounts is hardly "riskless"-- just look at argument number one regarding inflation. We all know what the Fed mandates are, and they are NOT to support the stock market. Frankly, these arguments in 3 and 4 sound to me like someone is not happy with their recent brokerage statement, and are desperate to get the Fed to reverse rates, which would be contrary to the Fed's mandate, while at the same time pretending to promote Savers. It reminds me of TFG going into paroxysms in 2019 and demanding that Fed lower rates.
5. Don't disagree with the need to get out and vote -- defend your right to choose.
6. It's your choice. Do you want more of the following: an authoritarian government telling you what books you can choose to read, telling you that what happened in the past needs to be forgotten, telling you what decisions you and your doctor can make, telling you to attend political rallies and wear special uniforms, telling you that George Orwell was not a socialist, telling you that war is peace, telling you that issues are only black and white, telling you that the minority is really the majority, telling you that scientists are stupid, telling you that higher education is foolish, telling you that regulations and mandates are unnecessary and that clean air and water are cyclical and oil is everlasting, telling you the really rich need to be really richer, and essentially telling you There Is No Alternative.
Regarding the appeal to lower taxes, I recall what Oliver Wendell Holmes said, "Taxes are what we pay for civilized society . . ." Certainly, both parties collect taxes, and increase the debt, to pay for stuff, The question for the voter comes down to what stuff do you want, what do you consider the common good, what kind of a civilized society do you want?
The Democrats may very well have a tough time in November, just like Obama and Trump did in their mid-terms. Personally I don't know how to explain our fickle voters. It reminds of a line from Shakespeare: "It hath been taught us from the primal state, That he which is was wish'd until he were."
Bonus: I got a belly laugh when Trump, who meant to endorse J.D. Vance, said at that rally in Ohio, "We’ve endorsed...J.P., right? J.D. Mandel and he’s doing great" Wow, mind like a steel trap. Now, where did he put those phones?
We don't like your kind around here!.
PS to Moderator.
I don't see where sarcasm is against the comment policy.
Interesting (silly) attempt at spin. Obviously, the "collective votes" of borrowers and lenders, refers to the Free Market, the opposite of Central Bank Central Economy planning.
--
"Rates should be set by the collective monetary votes of borrowers and lenders, consumers and investors each acting in their own interests." Must admit this sounds like communism and has never been done this way in the US.
You said the Free Market equates to Communism. I simply informed you, that is wrong.
Is voting popular, in your version of communism?
More popular, than in, say, democracies, or republics?
Anyway, now I have informed you, Market Votes = Free Market.
Market Votes, is the OPPOSITE, of Centrally Planned Economy.
You are Welcome.
I have shown and proved the Elections(not just presidential) are rigged and from both Parties. If people still want more I have Much more from many States. Hell, a few days ago in Hollywood a lady found over 100 mail ballots on the ground. The sheriff, USPS and other places didnt want anything to do with it. Just because CNN/Yahoo/Msn dont cover it doesnt mean it didnt happen..lol IF anyone would stop and think why they are banning and blocking people from talking in a free country the answer is obvious. (for most).
Anyways, your answer to the solution is right and our only option. ITs for EVERYONE to get out and vote. For people to watch and try to block the rigging. and PRAY we can over come the fraud like Trump , but now with mail out ballots and the purpose over inflating the voter roll we might have to over come 10-30% fraud. The AZ audit Jovan Pulitzer did proved it was a predetermined election. But thats it.. no one is stepping out to fight this because it IS so big. Courts are tossing cases without dealing with the fraud shown. In PA the Republican DA said he will not prosecute the 200+ mules he has on CAMERA.. why? Because he said that it would be UNFAIR to go after some when we cant identify ever single one! So you want to save this country? You want to stop the decades of manipulation from BOTH parties.. You all need to Vet the hell out of each person running for ANY office. Some of you will have to bite your tongues and go for people even if they are not aligned with your social values. If they are not on board to do away with the machines, drop them. If they are not on board to do full REAL audits like in AZ, Drop them. Its the Repubs and lawyer over there that is sitting on the REAL AZ audit results. ITs sick. IT is a criminal enterprise they have set up.
Ah yes, I have to vote in the next week. I better get reading those pamphlets.
The year-over-year number was 8.3%, also exceeding expectations of 8.1%. Core inflation looked even worse, coming in at 0.6% for the month (beating expectations of 0.4%) and 6.2% for the year (versus 6.0%).
Powell's fig leaf to avoid 0.75% increases just fell off!
Once a boom occurs (tech bubble), a bust happens when interest rates are raised (2001 downturn). In order to get the country out of the downturn, another boom is created (housing bubble), which also leads to a bust (2008 crisis)... fast forward to 2022.
Countries that have no central bank:
Andorra
Isle of Man
Kiribati
Marshall Islands
Micronesia
Monaco
Nauru
Palau
Panama
Tuvalu
( https://worldpopulationreview.com/country-rankings/countries-without-central-banks )
Some nice vacations spots, no doubt, but would you really want to live there?
Also, to test the hypothesis that the Fed exacerbates rather than ameliorates either the frequency or the amplitude of booms and busts, or both, one would have to analyze the data pre-1913 versus post-1913. Try as I might, I see no such analysis in comment #25.
That's a huge pay cut for American workers. Don't expect them to be happy campers when the November elections come.
Regarding the Democrats controlling the Senate. Unfortunately, that ain't necessarily so due to the filibuster. As I have said before, the voters are a fickle bunch. They'll put a president in office and then set up congress in opposition.