Inflation/Rates?

July2022 | May 17, 2021 | 41 posts since 2018

It seems that interest rates may start moving again. I understand the fed is trying to keep it low and some are saying it's only temporary but inflation seems to be getting a bigger grip on things.

I would run like a scalded dog from the market if I could ride some 4.5% CDs somewhere

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Answers

Kaight | May 17, 2021 | 1,192 posts since 2011

It's important to recognize the Federal Reserve, and not the marketplace, is currently in control of interest rates. And the Federal Reserve luv luv luvs inflation. They have been shooting for higher inflation for years. If more inflation continues to materialize it will be a dream come true for the Fed. And they will go on squeezing us savers with every weapon in their considerable arsenal.

America's financial circumstances have become dire. But it would require pain to return our economy to a solid footing, and the politics of pain is unsalable among today's electorate. So instead of the pain we, as a country, will continue to circle the drain.

Choice | May 17, 2021 | 937 posts since 2020

And, the FED mission in life is controlling/expanding inflation rate and only recently was employment also added as a factor! All by statute. The FED does what it’s empowered to do! A byproduct, like other consequences, may be the impact on saving rates!

alan1 | May 17, 2021 | 877 posts since 2015

As to whether "only recently was employment also added as a factor!", I guess it depends on whether you think 1977 is "recent".

From the Federal Reserve Act:

Section 2A. Monetary policy objectives

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

[12 USC 225a. As added by act of November 16, 1977 (91 Stat. 1387) and amended by acts of October 27, 1978 (92 Stat. 1897); Aug. 23, 1988 (102 Stat. 1375); and Dec. 27, 2000 (114 Stat. 3028).]

https://www.federalreserve.gov/aboutthefed/section2a.htm

As stated by the Federal Reserve Bank of Chicago:

In 1977, Congress amended the Federal Reserve Act, directing the Board of Governors of the Federal Reserve System and the Federal Open Market Committee to "maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."

Note 1 at https://www.chicagofed.org/research/dual-mandate/dual-mandate

(And that provision of the Federal Reserve Act sets forth what has been the stated policy of the United States, as enacted into law in the Employment Act of 1946.)

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