Federal Reserve, the Economy and CD Rate Forecast - June 8, 2021


Another Fed meeting is scheduled for next week (June 15-16). No policy changes are expected. For the rest of the Fed meetings this year, there will be a search for signs about when the Fed will begin to taper its asset purchases.

The latest speculation about the taper timing was discussed in this CNBC article. The article includes a possible taper timeline in which the Fed discusses tapering at its June or July meeting, announces tapering at its September or November meeting, and begins tapering in December or January.

If the timeline of Fed tightening follows the last tightening cycle, it may take a long time before we see widespread deposit rate gains. In the last cycle, taper discussions began in May 2013. The Fed announced its plans to taper in December 2013. The first Fed rate hike took place in December 2015. Widespread online savings account rate increases didn’t occur until the second half of 2017.

Of course, the timeline of Fed tightening will depend heavily on how the economy evolves. Based on the recent jobs reports, the Fed won’t find any reason to rush into tightening. The May jobs report was released last Friday, and the job gains were below estimates. However, the report wasn’t as bad as the April jobs report. In the jobs recovery, there is still a long road ahead. As mentioned in this Fox Business article, “the U.S. economy has 7.6 million, or 5%, fewer workers from its February 2020 pre-pandemic level.”

Next week’s Fed meeting will include updates to the Fed’s Summary of Economic Projections (SEP). That will show how the economic numbers have been improving as compared to past Fed forecasts. It will also show the Fed’s expectations about the future target federal funds rate (via the dot plot). In the March SEP, no FOMC participant expected a rate hike in 2021. Only four out of the 18 expected a 25-bp rate hike by the end of 2022. Seven expected at least one rate hike by the end of 2023. Next week, we’ll see if the rate hike camp grows.

The one big difference between the last Fed cycle and the current cycle is that the risk of high inflation appears to be much greater now. Inflation data in the last couple of months has been showing a significant rise in inflation. The May CPI numbers are scheduled to be released on Thursday. We’ll see if the CPI numbers will surprise on the upside again.

Even if inflation continues to be high, the Fed and many economists think that high inflation readings this year will just be temporary.

This opinion about inflation isn’t shared by all economists. Those at Deutsche Bank recently warned of a “potential crisis coming from inflation.” This CNBC piece described their forecasts. According to the Deutsche Bank economists:

“Already, many sources of rising prices are filtering through into the US economy. Even if they are transitory on paper, they may feed into expectations just as they did in the 1970s,”

The Fed claims that it knows how to deal with rising inflation. Its primary tool is hiking interest rates. The Deutsche Bank economists warn that rate hikes could “cause havoc in a debt-heavy world.”

With the Fed’s zero rate policy in a holding pattern for the foreseeable future, two other factors will influence deposit rate changes this year.

First, the deposit and loan levels at the banks will influence deposit rates. Since the pandemic began, government stimulus checks combined with lower spending has caused deposit levels to surge and loan balances to fall. That created the perfect storm for deposit rates, resulting in record low deposit rates.

As the pandemic ends, consumer spending should rise and the government will hopefully wind down the stimulus checks. That should eventually allow deposit levels and loan balances at banks to return to their pre-pandemic condition, and banks will once again have to worry about attracting deposits.

The latest data on the overall bank deposit and loan balance levels is provided by the Fed’s weekly data of Assets and Liabilities of Commercial Banks, and the data shows that deposits have started to decline. However, loan balances have also declined. In the current state of banking, it will take a long period of declining deposits and rising loan balances before the banking industry’s deposit and loan levels return to normal.

Last week, Fed data released on May 28th showed that deposits in the banking industry increased by only $600 million from May 12th to May 19th. For that same period, loan balances increased $8.80 billion.

For the latest week, there has been a decline in deposit levels. Fed data released on June 4th showed that deposits in the banking industry decreased by $10.6 billion from May 19th to May 26th. For that same period, loan balances declined $2.1 billion.

The second factor that may impact deposit rates this year is the economy and Treasury yields.

The smaller-than-expected May employment gain contributed to a decline in Treasury yields. In the last week, both the 10-year and 30-year yield fell 9 bps. The 5-year yield fell 4 bps.Short-dated yields continue to have no change with yields near zero.

The 10-year Treasury yield closing value today was 1.53%. That’s the lowest close since March 10th. With so many signs of rising inflation, it’s odd that we’re seeing these falling Treasury yields. This piece by Ben Carlson, portfolio manager at Ritholtz Wealth Management, reviewed this condition and offered some possible explanations:

higher inflation and low interest rates can’t coexist forever. Eventually, something has to give.

The bond market doesn’t seem to care about higher inflation just yet. Maybe it will in the future or maybe we’re just going to get an inflationary head fake from the weirdness of the pandemic economy.

Or maybe bond traders know it’s going to be impossible for the government to allow rates to rise substantially in the year ahead.

The slight odds of a 2021 Fed rate hike have gone down a bit according to the CME FedWatch Tool, which lists implied probabilities of future target federal funds rate hikes based on the Fed Funds futures market. The odds of a rate hike by the December Fed meeting went down in the last week from 8.7% to 5.0%. However, based on what the Fed has been saying, these slight odds appear to be too high for 2021. Nevertheless, if inflation keeps surging higher this year, the Fed could be forced to hike rates. The Fed would probably have to see signs of an inflationary spiral in which inflation fears drive inflation higher which then increases those fears. The Fed may feel it necessary to act sooner rather than later in such a scenario.

The following numbers are based on Daily Treasury Yield Curve Rates and the CME Group FedWatch.

Treasury Yields (Close of 6/8/2021):

  • 1-month: 0.01% same as last week (0.15% a year ago)
  • 3-month: 0.02% same as last week (0.17% a year ago)
  • 6-month: 0.04% same as last week (0.19% a year ago)
  • 1-year: 0.05% up 1 bp from 0.04% last week (0.19% a year ago)
  • 2--year: 0.14% down 2 bps from 0.16% last week (0.22% a year ago)
  • 5--year: 0.77% down 4 bps from 0.81% last week (0.45% a year ago)
  • 10-year: 1.53% down 9 bps from 1.62% last week (0.88% a year ago)
  • 30-year: 2.21% down 9 bps from 2.30% last week (1.65% a year ago)

Fed funds futures' probabilities of future rate changes by:

  • Jun 2021 - up by at least 25 bps: 5.0%, down from 7.0% last week
  • Sep 2021 - up by at least 25 bps: 5.0%, down from 6.8% last week
  • Dec 2021 - up by at least 25 bps: 5.0%, down from 8.7% last week

CD Interest Rate Forecasts

There were just four noteworthy CD rate changes in the last week. All were at credit unions. Two of the four credit unions made small rate increases on their 5-year CDs. The other two lowered most of their CD rates.

The few CD rate changes suggest that CD rates have pretty much stabilized near a bottom. There may be a few small rate increases and decreases, but I don’t expect any widespread changes for a while.

The stabilizing of CD rates near a bottom can be seen in the Online CD Indexes. Since December, Online 1-year CD Index and Online 5-year CD Index have been falling very slowly. These indexes track the average rate of 10 well-established online CDs. For May, the Online 1-year CD Index had its first rate increase since January 2020, rising 1 bp from 0.44% to 0.45%.The Online 5-year CD Index didn’t have a rate increase, but the average held steady for the second straight month at 0.65%. The 1-year rate gain was small, but at least it’s a step in the right direction.

I’m only including one to three CD rate changes per institution to avoid an overload of data. All percentages listed below are APYs.

  • Blue FCU (5yr 1.05% → 1.10%, 1yr 0.55% → 0.40%)
  • Kinecta FCU (5yr Jbo 1.00% → 1.05%, 1yr Jbo 0.50% → 0.55%)
  • NuVision FCU (5yr Jbo 1.00% → 0.95%, 1yr 0.60% → 0.55%)
  • Pen Air FCU (5yr 0.99% → 0.80%, 3yr 0.80% → 0.70%)

I’ll have more discussion of the CD rate changes in my CD summary later today.

There were just a few noteworthy rate changes of savings and money market accounts in the last week.

The rates at small and new online banks continue to fall toward the averages at the major online banks. BrioDirect and Prime Alliance Bank both had rate cuts that lowered their rates below 0.60%.

Overall, there are signs that rate declines may be coming to an end. Our Online Savings Account Index which tracks the average rate of 10 well-established online savings accounts had its first monthly increase since February 2019. The Online Savings Account Index increased 1 bp from 0.45% on May 3rd to 0.46% on June 1st. Just like the Online 1-year CD Index increase, it’s small, but it’s a step in the right direction.

Below are examples of important savings 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.

  • Patelco CU MM Select (up to $2k, 2.00% → 1.00%)
  • BrioDirect Online Money Market Savings (0.60% → 0.55%)
  • Prime Alliance Bank Personal Savings Account (0.60% → 0.50%)

Economic and Deposit Rate Scenarios in 2021 and Beyond

The following is a review of four scenarios about how the economy and interest rates will evolve over the next few years. A rise in interest rates will almost certainly require a steady and strong economic recovery. So future interest rates depend heavily on the future health of the economy.

It’s possible that interest rate increases could be caused by a sustained period of rising inflation. In this case, the Fed may be forced to hike rates even if the economy hasn’t completely recovered. Based on history, the odds of this happening appear low. However, as I described above, the odds of this appear to be rising. Thus, I”ve added a new scenario that takes this into account.

There’s always the possibility of major shocks to the economy that could cause a depression. A depression would almost surely result in the zero rate environment to continue for at least the next decade. The odds of this are also low.

I think one of the following four scenarios is most likely to occur over the next decade:

  1. Surging inflation forces the Fed to act.
  2. Strong and fast economic recovery
  3. Slow economic recovery
  4. No sustained economic recovery

Surging inflation forces the Fed to act

April 2021 may go down in history as the first month of the post-pandemic inflation surge. The Consumer Price Index (CPI) for April far exceeded economists’ expectations. The year-over-year gain in the CPI was 4.2% and the month-to-month gain was 0.8%. Even core CPI (which excludes food and energy) far exceeded expectations. Core CPI increased 3% on a year-over-year basis and 0.9% on a monthly basis. The monthly rise in core CPI was the largest since 1981.

For the Fed to act on a surge of inflation, it will likely require that the surge proves to not be transitory. The Fed currently expects some spikes in inflation as the economy reopens, and it’ll take more than a couple of months of high inflation for the Fed to worry. It’s hard to say how many months of rising inflation it will take for the Fed to act. If rising inflation continues into 2022, the Fed will have a difficult time convincing the public that it’s only transitory.

As inflation starts to look less and less transitory, the markets will likely start to suffer with larger and larger corrections. This will probably force the Fed to maintain the transitory line until it finally has no choice but to admit that it has to act.

In this scenario, my guess is that the Fed would act sometime in 2022 after more than a year of rising inflation. The difficult question would be how the markets and the economy would respond. A recession seems likely. The bigger the crash and recession, the more likely that high rates would be short-lived. This would be the time to lock into long-term CDs. My parents did that in the early 80s with a 10-year CD that had a 16% APY.

It’s possible that the Fed may feel it cannot taper its bond buying or raise interest rates. In that case, we could keep living with rising inflation. It took quite a bit of time in the 70s before Volcker became Fed Chair and was willing to lead the Fed to hike rates to levels necessary to end high inflation. Thus, it may still take multiple years before we see rate hikes. Even if the Fed doesn’t tighten policy, long-dated bond yields may rise. That could impact CD rates.

Strong and fast economic recovery

Of course, a quick economic recovery would be the best case scenario for deposit rates, but even in that case, the Fed won’t be in a hurry to raise rates. Their new inflation framework will likely cause them to be slower in their rate hikes than they were in the last zero rate period. In the Fed’s March Summary of Economic Projections, no FOMC participant expects a rate hike in 2021. Only four out of the 18 expect a 25-bp rate hike by the end of 2022. Seven expect at least one rate hike by the end of 2023. So in this best case scenario, the Fed will start hiking rates by either the end of 2022 or 2023. As we learned in 2015 and 2016, it can still be a long time from the first Fed rate hike to when we see significant increases in deposit rates. It took about 18 months after the first Fed rate hike in December 2015 before we started to see widespread deposit rate increases.

Slow economic recovery

There are many things that could prevent a strong economic recovery. These include a pandemic that doesn’t go away and government policies that inhibit growth. If economic growth is weak, that will push out the Fed’s first rate hike. In this case, we could see this zero rate period be close in duration to the last one. If it matches the duration exactly, the first Fed rate hike wouldn’t come until March 2027.

No sustained economic recovery

If the pandemic, bad government policies or other factors prevent a sustained economic recovery, the Fed may hold rates near zero for a period that would be longer than the last one, which lasted seven years. In this scenario, the economy remains weak with high unemployment and low GDP. The economy would have to improve and force inflation to rise in a sustained fashion before the Fed would even think about rate hikes.

Possible deposit rate changes in 2021 and 2022

Before the Fed starts to hike rates, it’s possible that we’ll see small gains in CD rates. Based on the 2013-2014 history, the start of the Fed tapering its asset purchases could be the first sign of higher CD rates. In May 2013, the Fed Chair started to signal that a pull back or taper of its asset purchases was being considered. The first small pull back was announced by the Fed in December 2013. This period is known as the Taper Tantrum, and Treasury yields did have significant increases in 2013 and 2014. CD rates also had increases.

The Taper Tantrum period of 2013 and 2014 was a time when CD rates went up even as the Fed was holding steady with rates near zero. PenFed’s 5-year CD yield was 1.15% from May to August, 2013 (pre-2020 all-time low). PenFed’s 5-year CD yield increased to 3.04% In December 2013 and January 2014. Ally Bank’s 5-year CD yield increased from 1.51% in May 2013 to 2.00% in September 2014. Synchrony Bank’s 5-year CD yield increased from 1.51% in April 2013 to 2.30% in April 2014, and Discover Bank’s 5-year CD yield increased from 1.50% in October 2013 to 2.10% in August 2014.

The rising long-term Treasury yields in 2021 have contributed to the rise of long-term brokered CD rates. This may lead to a rise of long-term direct CDs in 2021 and 2022. However, one thing that is different today than in 2013 and 2014 is the surge of deposits at banks and credit unions. The government stimulus checks combined with lower leisure spending in 2020 have contributed to record deposit increases at banks and credit unions. Most banks don’t need deposits, and thus, they are free to lower deposit rates to record low levels. This helps explain why even some online banks are offering incredibly low deposit rates (as examples, Citizens Access 1-year Online CD at only 0.10% and Barclays 5-year online CD at only 0.25%).

Future Rates and CD Term Decisions

It’s possible that we will see a strong economic recovery in 2021 and that will cause the Fed to signal that it’s thinking about tapering its asset purchases. If that happens, we may see some CD rate gains, especially on 5-year CDs, by the end of 2021 or in the first half of 2022. A strong economic recovery also has other effects that contribute to rising deposit rates. A strong economy results in higher loan demand which requires increased deposits. Also, a rising stock market encourages investors to move money from cash into stocks. That lowers deposit levels at banks.These factors encourage banks and credit unions to raise deposit rates.

In the 2013-2014 Taper Tantrum period, 5-year CD rates at online banks increased 50 to 80 basis points. Larger rate increases occurred at a few credit unions. PenFed had some of the largest increases. Its 5-year rate increased almost 200 basis points. If we see similar rate increases in the next two years, we could see top 5-year CD rates at online banks be in a range from 1.50% to close to 2.00%. We could see some CD specials at credit unions with rates above 2.00%.

With at least some possibility of 2% CD specials in 2021 or 2022, locking into long-term CDs with rates near 1% and below doesn’t seem like a good strategy. The possibility of an inflation surge also doesn’t make long-term CDs appealing. If we do start to see 2%+ CDs in the next two years, it’ll be better to keep cash in online savings accounts or reward checking accounts. Then you’ll be able to jump on those CD specials when they appear. The risk that inflation surges and the Fed is forced to raise rates is another reason to keep your money in liquid accounts.

Long-term CDs now only make sense if we’re headed back into a long period of very low rates. In that case a 1% long-term CD will be better than a top savings account with a rate near 0.50%.

During the zero-bound years from 2008 to 2015, online savings account rates remained in a range of 0.70% to 1.00%. There was little to gain with CDs that didn’t have yields higher than this. In today’s new zero rate environment, it appears we are near a bottom for deposit rates. My best guess for this new range for online savings account rates is 0.40% to 0.60%. If you do want to hold CDs, at least make sure that the CD rate is at least higher than 0.60%.

The difficult decision for savers is trying to decide when it’s the right time to lock into long-term CDs. When you see a new higher rate, is it a sign that higher rates are coming which suggests you should wait? Or if you see that a CD rate has reached a certain high (like 2% or 3%), should you acquire that CD? As I mentioned above, it may seem prudent to wait, but as we’ve seen in the past 10 years, rates rarely rise as much as we expect. Once the Fed starts hiking rates, the rate hikes may not last long.

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. 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 from March 2020 to May 2021. The average rates for CDs of all terms are now at 5-year lows. The previous lows occurred more than five years ago in December 2015, just before the Fed’s first rate hike. The average savings account rate (0.132%) is also at a 5-year low. The previous low was 0.177% in December 2016.

  |     |   Comment #1
I don't believe for one minute that high inflation readings this year will just be temporary. This will be a multi-year inflation event with the FED behind the curve as in the past. Rates will go back up higher and faster than most believe since inflation must be controlled due to the US debt load.
  |     |   Comment #31
Here's the thing about that.

Let's say the inflation is only temporary and lasts for only one year. How much consolation is that exactly?

If inflation is 10% in that year and you are earning 0.5% on your bank deposit, you just lost 9.5% of the value of that money. If inflation is 20% you lost 19.5% of its value.  And if it lasts two years your loss is twice that.

Do you think in the next year, prices are going to go down and you will make it up? When was the last time you saw that happen? It is a permanent loss.

So I am not comforted by the government telling me "Don't worry, it's only temporary." To me it sounds like "Don't worry, we will steal your wealth so fast 99.9% of you won't even know what hit you until it's too late for you to do anything about it."
  |     |   Comment #32
As with most things in life, it's not that black & white. Depending on which prices you are talking about, there is the very real possibility of them coming back down (probably not all the way to where they were, there is some real long-term inflation going on along side the temporary inflation from COVID related shortages, but certainly lower than the temporary spike prices). We see this with Gasoline prices all the time. For example, when a hurricane in the Gulf puts a few rigs out of operation, prices go up, only to come back down once things get back to normal operations (though prices rarely seem to drop as fast as they rise). Gasoline, at current prices, is still cheaper than their peak from several years ago (when gasoline taxes in most jurisdictions were lower) so clearly prices are capable of moving in either direction, despite your claims to the contrary. So yes, some prices will come back down from the highs caused by temporary COVID related shortages. The only real questions are how far and how fast will they come back down?
  |     |   Comment #34
"The only real questions are how far and how fast will they come back down?"

I don't think that's the only real question unless forever is your time frame and you can always say "They still might come down." I think the reality is that the inflation is suddenly so broad based across products now that predicting that prices will come down to a level that retroactively represents the 1 or 2% level of inflation we have been experiencing for the last decade or more already requires price declines in many areas we have never seen them before. That prediction, while not impossible, requires something to happen that has never happened before in modern times.
  |     |   Comment #36
"I think the reality is that the inflation is suddenly so broad based across products now"

That's because we've had such broad based supply chain disruptions, unlike any we've experienced in the past. You can't shut down whole economies for months and not have such disruptions. But such disruptions are temporary in nature. Now that the economies of the world are reopening, and government mandated restrictions are being lifted, you should see those supply chains getting back to normal and the increases in prices that those disruptions cause should also ease back a bit. Again, how much of the actual inflation will remain after that remains to be seen, but until then those supply disruption caused spikes are muddying the water, making inflation look worse that it is (and comparing this years prices to last years, in the middle of the pandemic shutdown economy, only makes the picture more distorted).

In short the real reality is that it will take time to see what the real inflation picture is, and it's less than it looks like at present due to the aforementioned supply shortages and distorted numbers from a poor choice of comparison.
  |     |   Comment #2
To formulate reasonable speculation about where the bank deposit rate market is going, I think you have to understand the underlying philosophy coming out of Washington now. And I think the message to savers is clear. Independence, self-reliance and self-determination is to be punished, dependence on government and adherence to Washington elitist edict is to be rewarded. Don't fight us, be quiet, sit down, take the government check and if you do as we tell you to do we will provide you with your daily sustenance. Does that message sound familiar?
However, a couple of developments this week may have dealt a severe blow to the Democrat's legislative blitzkrieg and may be a game changer. First, the Senate parliamentarian ruled that the Democrats may not floor more than one more non-filibusterable reconciliation bill this year. That forced the Democrats to scramble to change their strategy and it looks like their plan is to throw everything they have into a single all time mother of all pork filled bills in what sounds to me like Marx and Engels' Communist Manifesto. I think this significantly reduces their chances of passing it and already some Democrats appear to have had enough as they look at 2022 and realize that this isn't what their constituents voted for last year.
Mind you I am not suggesting that today's Democrats wouldn't pass this bill in a heartbeat if they thought they could get away with it and remain in power. But they know that they are already on thin ice for '22 and this would be tantamount to political suicide. So the ones who have to run next year may well start peeling off ... running away from the radical Biden agenda with terror in their hearts.
In fact it looks like at least one Senator, Joe Machin, Democrat from one of the reddest of the red states said he is not supporting the Democrat's HR-1 bill making radical and probably unconstitutional changes to the election process. He also indicated that he does not support their effort to end the filibuster. You know the filibuster, it's that little thing that the Democrats used to block Republican legislation more than 300 times last year alone and called "essential democracy.". Apparently they've decided its not so essential anymore and now are desperate to eliminate it. Anyway without Manchin's support neither of these bills are going anywhere putting a good part of the Democrats agenda in serious Jeopardy.
Breaking right now, the Biden administration's "infrastructure" bill, that contained anything BUT infrastructure looks like it is all but dead.
I think the entire Biden agenda is on the brink of collapse. It's the only good news for depositors, and the rest of American citizens in the last 7 months. But if it sticks, it will be good news indeed.
I'm amazed at how vicious the Democrats attacks are on Joe Manchin one of their own. This is a Democrat senator in one of the most Republican states in the country. Don't they get that if he changes parties they lose their majority in the Senate and their chances of passing their agenda go to virtually zero? I think these attacks on him are very foolish, particularly since he's not the only Democrat who might not be on board with their agenda. I think there are others who are sitting back silently so as not to have to let their positions be known and hope they never have to. He's the only brave one, so he's taking all the heat for them. And they're fine with that.
  |     |   Comment #9
Yes, agree, the Democrats are viciously attacking their own.
  |     |   Comment #10
The progressive Squad is lashing out at Sen. Joe Manchin after the West Virginia Democrat announced his opposition to congressional Democrats' highest priority piece of legislation, known as the For the People Act.
Manchin said Sunday he won't support the sweeping election overhaul reform because it's too partisan and would further divide the country – earning the wrath of the most liberal members of Congress.
 Rep. Jamaal Bowman, D-N.Y., called Manchin the "new Mitch McConnell." Rep. Alexandria Ocasio-Cortez, D-N.Y., accused the moderate senator of backing GOP "voter suppression." And a third New York Democrat, Rep. Mondaire Jones, said Manchin is trying to "preserve Jim Crow."
Missouri Rep. Cori Bush, a Black Lives Matter activist before entering Congress this year, said Manchin should just fall in line with the rest of his party "or get out of our way."


I don't know about you, but if I was a senator from one of the most Republican states in America and the Democrats treated me like this, I'd seriously be thinking about switching parties.  What does he have to lose?
#14 - This comment has been removed for violating our comment policy.
  |     |   Comment #17
In May, House Republicans removed Rep. Liz Cheney of Wyoming as conference chair in retaliation for her criticism of Trump even though she voted with Trump 92.9 percent of the time and she is a staunch supporter of conservatism.

Wow what a vicious attach on Liz Cheney by her own Republican party!

"Today, we face a threat America has never seen before: A former president who provoked a violent attack on this Capitol, in an effort to steal the election, has resumed his aggressive effort to convince Americans that the election was stolen from him," Cheney said.

"He risks inciting further violence," she continued. "Millions of Americans have been misled by the former president. They have heard only his words, but not the truth, as he continues to undermine our democratic process, sowing seeds of doubt about whether democracy really works at all."
  |     |   Comment #27
What does he have to lose in joining up with a corrupt tribe of outlaws?

His integrity, no less.

Not that the Dems have much more of it.
  |     |   Comment #19
Biden economic plans are popular with Americans and people believe we need a stronger system of social supports for workers, parents, children and the elderly and we have to make investments now to allow the economy to keep growing and to become more equitable.

That includes money for roads, water pipes, broadband internet, electric vehicle charging stations and advanced manufacturing research. It also includes funding for affordable child care, universal prekindergarten and a national paid leave program.

The word socialism and similar words is a charge Republicans have used against Democrats for decades in an effort to scare voters into opposing the Democrats ideas, platforms and elections.

But what are Republicans calling socialism? Democrats have tended, through regulation and other ways, to empower the federal government and in regulating the economy than the Republicans.

Trump was very fond of using the government and being willing to spend money and do things that by Republican's usage of the word were " socialist." Like passing the CARES Act to aid businesses and providing $600 payments to unemployed workers in the coronavirus pandemic and use federal money to rescue farmers who have been hurt by his trade disputes with China and other nations.

Let's bust the myth that social programs weakens self-reliance and instead support these programs.
  |     |   Comment #28

Then have the guts to pay for them.
  |     |   Comment #35
PD Has it right. We need all these FREE programs. No such thing as a FREE lunch.

How are all these programs going to be paid for. FREE health care. FREE childcare , Base wage, FREE Pre K. FREE College and even if you borrowed over a trillion dollars for expensive college hey don't bother paying it back.

Our society likes the word FREE. Nothing is FREE.

We don't cover our programs now. How do you pay for these new programs?

We'll tax the rich. That won't cover any of the costs.
  |     |   Comment #37
None of these plans are FREE
While the U.S. is the ONLY country of 41 countries that DOES NOT have a national paid leave mandate, California, New Jersey, Washington, New York, Rhode Island and the District of Columbia all have state-mandated paid leave plans in place.

California and Rhode Island fund their programs through an employee payroll tax, while New Jersey, New York and Washington impose payroll taxes on employees and employers. Wage replacement rates among the states range from 50 percent to 90 percent,
More recently, Paid Parental Leave for Federal Employees was made available

On average, a family making the state median income would have to spend 18 percent of their income to cover the cost of child care for an infant, and 13 percent for a toddler and other families pay up to 23% of their income.

All other industrialized countries have programs to help families with childcare,
Biden’s plan promises lower and middle-income families will pay no more than 7% of their income on child care for the first five years, saving families money.

.Treasury officials want to close the “tax gap” between what taxpayers owe to the federal government and what they actually pay and raise an additional $700 billion
  |     |   Comment #38
Funny how you mention the states that people are fleeing because they can't afford the taxes. I am leaving NY to get away from the high taxes.

In fiscal year 2020, the federal budget deficit totaled $3.1 trillion—more than triple the shortfall recorded in fiscal year 2019. The deficit in 2020 was equal to 14.9 percent of GDP, up from 4.6 percent in 2019 and 3.8 percent in 2018.Nov 9, 2020.

So Biden gives you vaporware that he will get 700 billion a year.from the rich. Heard this line to often. You forgot to mention his tax plan on the 1% that will raise 1.5 trillion over 10 years. Love when these amounts are measured over10 years.

What is the current U.S. National Debt amount? The current U.S. debt is $23.3 trillions as of February 2020.

You fail to mention how we will pay for Healthcare (Guess Obama care dosen't work). Maybe we should have read it before it was signed.

Free college. Where the funds come from to pay for this? Since you are so generous with others money maybe you should fund someone's college education. .

Forgive student loans that borrowers promised to pay back.. Maybe they could have gone to a cheaper school. What about the people who paid their debt by working hard or an extra job. We can think of a new tax to pay for this.I paid my student loans and worked when I was in school. Proud I paid back the money the government loaned me.

But Joe won't be around for a second term. Maybe not make it to the end of this term. We'll have Kamala Harris who thinks everything is funny when she is asked a serious question. She hasn't been to the border or even Europe.

While we're at it let's pay out some reparations.

If all these countries have better programs than ours maybe some in the US may want to check these countries out. Maybe the illegal immigrants from Central America should check out their countries not the US. Biden can give this job to Harris.
  |     |   Comment #3
The Fed's assertion that inflation readings are temporary seems to be based on confirmation bias rather than dispassionate analysis. Bank of America's head of U.S. equity and quantitative strategy (S. Subramanian) offers a simpler and more objective analysis "“Inflation risk is what we want to watch here...I don't know if it's going to be transitory."
  |     |   Comment #7
Yes and no.

Some of it is definitely temporary. Prices that have spiked due to shortages resulting from COVID restrictions on businesses should mostly go away as the shortages are resolved in the weeks and months ahead as the restrictions are lifted. That's the very definition of temporary.

However, some of it won't be temporary, because it's driven by money printing and other polices which have resulted in the devaluation of the dollar (which drives up inflation).

The problem is determining how much is temporary and how much is actual inflation. Until the temporary issues are resolved, we won't have a good answer on that.

And it only paints a distorted picture when people cherry pick points of comparison to "prove" their narrative, as I've seen some do in previous iterations of this topic (such as trying to compare todays prices to the price of gas last year, when it had dropped considerably due to COVID restrictions greatly cutting demand at the same time as a supply glut had formed from a disagreement over production between Russia and OPEC). Bottom line is you can't meaningfully compare todays prices to the prices during such an unusual event as a worldwide pandemic where normal commerce was overridden by government mandates and try to claim that as "proof" of anything. If you have to compare prices, do so with values from the "normal" economy pre-pandemic, not from values skewed by everything that went on with the pandemic. The pandemic economy simply isn't a valid or useful point of reference for determining actual inflation because there was nothing remotely normal about it. It's an anomaly, not a baseline and anyone that uses it as one merely undermines their own argument whether they realize it or not.
  |     |   Comment #16
Green Dream: I don't disagree with your comments. However, you underscored the essence of my point when you said, "Until the temporary issues are resolved we don't have a good answer for that" (how much of the inflation is temporary). Your assertion is clear, simple, and without bias. It is the same thing that BOA equity head said (which I quoted): we don't know how much is transitory. My concern regarding the Fed is that they don't seem to have the same level of humility and objectivity. If they were saying, "Some of the inflation is temporary and pandemic related, but we don't what the future will bring" that would be fine. But instead they seem to be insisting that the inflation will be transitory, rather than admitting they don't know what will happen in the months ahead. That is why I expressed my concern about confirmation bias--I am worried that the Fed is too strongly invested in their prognostications.
  |     |   Comment #33
You have to remember, anything you hear from the Fed is laced with political (not in the Republican vs Democrat sense) considerations. The Fed doesn't want to spook the markets, the markets don't like uncertainty, so, politically, they're either not going to admit what they don't know or they'll do their best to downplay/discount it when they can't avoid admitting it.
#4 - This comment has been removed for violating our comment policy.
  |     |   Comment #6
On May 5th, Mitch McConnell said he's "100 percent" focused "on stopping Joe Biden's administration." (This is of course the same playbook that McConnell played with Obama.) Without some attempt at bipartisan legislation and because of the Senate fillibuster, there will be little done to improve the standard of living for the majority (let's face it the McConnells do not care about the majority of the people). There will be constant division between those who favor democracy versus those who favor the rule of the minority. What does this have to do with DA? Probably very little so far, but this does not stop the McConnells from constantly wanting to have a redo when they lose. William Faulkner wrote "The past is never dead. It's not even past," It appears we never tire of our civil wars.
  |     |   Comment #8
I want infrastructure to ensure America is ready to combat Chinese and Russian aggression in the 21st century. But I don’t want to turn America into a welfare state.

I want a clean environment. But I don’t want to be dependent on people who chant “Death to America” on the streets.

I want healthcare. But I don’t want to destroy the engine of innovation that makes it possible.

I want immigration. But I don’t want open borders that imports mass poverty to sink America’s economic ship and creates a class of unskilled, unassimilated welfare dependent people.

If it takes gridlock to prevent the “fundamental transformation of America” count me in. And it appears that’s what it takes. The Republicans need to stall everything for 18 more months. After that the electorate will get the job done.
  |     |   Comment #11
this post had 59 comments and now it has 11?
  |     |   Comment #12
There are 59 comments on the 6/2 thread from last week. Maybe you mixed them up? Sometimes they carry from the prior week.
  |     |   Comment #13
i clicked there where the number 59 is and it took me here. dunno.
  |     |   Comment #15
so okkkk i clicked in a different spot and the 59 show up. glad to see the whole world didn't get deleted.
#18 - This comment has been removed for violating our comment policy.
  |     |   Comment #20
I, too, am a strong supporter of education. I want my kids to be taught the way things are (or were) versus the way they should be (or been). I want our infrastructure modernized and maintained, without being motivated by cold war McCarthyism to do so. I want our environment protected to benefit all, without some fascist groups parading around in military garb interfering. I want universal healthcare instead of clinging to a past system that has only gone from bad to worse. And I want legal immigration for those who want a better life and willing to work.
  |     |   Comment #29
Might I mention that I want freedom of speech PD, but not to have to see your banalities here week after week?
  |     |   Comment #30
So what you really want is freedom of speech you like and silence instead of speech you don't. Sorry, but that's not freedom of speech. Freedom of speech means allowing both speech you do and don't like.
  |     |   Comment #41
‘If liberty means anything at all, it means the right to tell people what they don’t want to hear.’
  |     |   Comment #21
Come to NY. This is what is considered "free college":
To be eligible, you must:

Be a NY State resident and live in the State for at least 12 continuous months before the term you want to receive the award
Enroll at a 2-year or 4-year CUNY or SUNY college
Be pursuing an associate’s or bachelor’s degree
Attend school full time
Earn $125,000 or less (household federal adjusted gross income)
Complete the Free Application for Federal Student Aid (FAFSA) and the Tuition Assistance Program (TAP) application

The scholarship covers the remaining cost of tuition after other scholarships and financial aid like the Pell Grant and the Tuition Assistance Program (TAP) are applied. You can receive up to a $5,500 scholarship from the program.
The program doesn't cover other costs of college, such as room and board, fees, or transportation.

To keep receiving payments each year, you must:

Continue to live in NY State
Earn passing grades
Complete a total of 30 credits each year
Stay on track to graduate within 2 or 4 years, depending on the degree.
After you complete your degree, you must live in NY State for the same number of years you received the scholarship.

Many are upset that the program doesn't pay for books and fees.
  |     |   Comment #22
Today, The City University of New York (CUNY) is made up of 25 institutions including 11 senior colleges, seven community colleges, Graduate School of Journalism, and CUNY School of Law, The University serves more than 275,000 degree-seeking students each year.

For more than 125 years after it was founded in 1847 as “the Free Academy,” the City University of New York (CUNY) had remained tuition-free. It provided an important path to quality higher education for the children of New York’s poor and working-class families who would otherwise be unable to afford it. CUNY was forced to end this policy in 1976 in the middle of a city fiscal crisis.

Over the years, how many people's lives, families' lives, our economy and society were greatly improved by access to free higher education in this great democratic achievement.
  |     |   Comment #23
And it is now tuition free if you follow the requirements listed above since 2017. No real change. But who pays? Quality? Oh Going to visit North Carolina for the 4th time in July to prepare our move next year. The property taxes are 1/3 what I pay and NY and other costs are lower.

But let's add free day care

But Healthcare should be free, a right.

Guaranteed wage is nice too.

We can't pay for the programs we have now.
  |     |   Comment #24
I love how these high tax states call these things "free tuition" instead of the paid for by taxpayers' tuition that it actually is.

I noticed that the list of requirements didn't include sending an annual thank you note to taxpayers for paying for your college.

I worked 3 jobs to put myself through college. All I learned in that 7 years is what a chump I was for doing that.

What I want to know is when are the taxpayers going to have candidates for public office?  Why isn't there a national taxpayers' appreciation day and a similar day in every state?  When are governments going to start talking about efficiency of spending in appreciation of the taxpayers who have to pay for it all and view every dollar spent from the perspective of whether or not it is the best use of the taxpayers' money?  I never even hear this mentioned never mind considered on a regular basis.  Maybe it's racism to talk about the taxpayers' sacrifice?  But isn't the definition of slavery when you work but don't get to keep the fruits of your labor and someone else determines how they are spent?

Ever watch Naked and Afraid on Discovery Chanel?  Often when they kill an animal to eat they thank the animal for its sacrifice before scarfing it down.  No such appreciation for taxpayers.  They just chug the money let out a belch and wipe their mouths with the back of their sleeves.  Then demand more.
  |     |   Comment #25
PD I worked shifts, nights, weekends and holidays and and overtime for many years. Unpaid callouts when I became exempt. I have been saving for my daughter's education for years.

OH In NY they thanked us. Protests because room and board, fees and books are not included so you have to pay for those. Also, they are unhappy as you must live in NY AFTER you compete your college for the number of years the state paid funds for your college. If not the funds are considered safe loan and believe me NY will come after you. Typically fees at the State-operated campuses range from $1,300 to $3,450. CUNY fees. $125 tech fee, activity fee $80 to $120 and a $15 consolidated service fee. CUNY administrators and full-time professors are raking in taxpayer dough, with 48 employees pulling down more than a quarter-million dollars in salary in 2018. And 411 staffers make more than Gov. Cuomo’s $179,000 annual paycheck. But let's ask Elizabeth Warren about college loan forgiveness and free college. Massachusetts Senate candidate Elizabeth Warren was paid $429,981 as a Harvard law professor from 2010 to 2011
  |     |   Comment #26
Oh the humanity!
(or maybe Humanities in this case)
  |     |   Comment #39
"Why isn't there a national taxpayers' appreciation day and a similar day in every state?" Probably because it would embarrass Buffett & Bezos.
Anyway, i paid full freight for my education as well as my daughter's (which was considerably more than mine due to extreme Higher Ed inflation), And of course i shell out every year for public education via property taxes. However, i still think supporting education supports the common good, albeit perhaps their budgets and means testing need more oversight.
#40 - This comment has been removed for violating our comment policy.
Federal Reserve, the Economy and CD Rate Forecast - June 1, 2021

Note regarding the liquid account summary: Since today is the first day of the month, the liquid account summary will be delayed until Wednesday. This will give me time to include new-month rate changes into the summary.

Last week, the April Personal Income and Outlays report was released. This report included the personal consumption expenditures (PCE) price index. The core PCE (which excludes food and energy) is the Fed’s preferred inflation gauge. In April, core PCE increased 0.7%, and on a year-over-year basis, the core PCE increased 3.1%. According to Reuters,...

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Federal Reserve, the Economy and CD Rate Forecast - May 25, 2021

For the rest of this year, we’ll be watching how high inflation rises and how long it takes for the Fed to start shifting to a tightening policy. April CPI numbers that were released on May 12th showed higher inflation than economists had predicted.

More inflation news will come on Thursday when the April Personal Income and Outlays report is released. This report includes the PCE price index. The core PCE (which excludes food and energy) is the Fed’s preferred inflation measure. According to the Calculated Risk blog, the consensus is...

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Federal Reserve, the Economy and CD Rate Forecast - May 18, 2021

The big news in the last week was the inflation numbers for April. The Consumer Price Index (CPI) for April far exceeded economists’ expectations. The year-over-year gain in the CPI was 4.2% and the month-to-month gain was 0.8%. Even core CPI (which excludes food and energy) far exceeded expectations. Core CPI increased 3% on a year-over-year basis and 0.9% on a monthly basis. According to this CNBC article, “the monthly gain in core inflation was the largest since 1981.”

As expected, Fed officials are insisting that this inflation is just temporary....

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Federal Reserve, the Economy and CD Rate Forecast - May 11, 2021

The surprisingly weak April jobs report that came out on Friday will make it easier for the Fed to delay rolling back accommodations. The first step in the rollback will likely be tapering of the asset purchases. Fed Chair Powell has said that the Fed is looking for “substantial further progress” toward their goals before they start tapering. We’ll probably need several months of strong job reports before the Fed will start thinking about tapering.

Tapering of asset purchases will likely start the process of pulling back accommodation. Tapering involves the...

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Federal Reserve, the Economy and CD Rate Forecast - May 4, 2021

As expected, there were no policy changes announced at last week’s Fed meeting. In the post meeting press conference, Fed Chair Jerome Powell refused to give any clear timetable about when the Fed would start pulling back policy accommodations, which would include reducing its asset purchases and hiking rates. The Fed Chair would only say that they are looking for “substantial further progress” toward their goals. In the Fed Chair’s opening statements, the latest employment data was described which showed the long road ahead before the economy recovers to pre-pandemic...

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