Powell Casts Doubt On Further Rate Increases

Kaight | Mar 22, 2023 | 1,192 posts since 2011

Powell did 25 today. But:

He took further rate increase signals from the last FOMC meeting (end of January beginning of February) off the table. Powell is now saying:

He believes widespread credit tightening could well take the place of future Fed rate hikes. However, he does not foresee Fed rate cuts this year.

Impact on us savers:

Can our CD, and other, interest rates continue to climb in the absence of ongoing Fed hikes? What would drive such interest rate increases? If lenders tighten credit, as Powell is predicting, it's not likely to be demand for funds.

Also on inflation:

Powell continues to hue to the 2% target. BUT, he is talking about reaching that goal in 2026!!!!!!!!!! So it appears inflation is here to stay for an extended period.

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Ally6770 | Mar 22, 2023 | 4,310 posts since 2010

Slow and easy. No recession or deflation. HOPEFULLY

sams1985 | Mar 22, 2023 | 781 posts since 2022

Treasuries are taking a beating...it's all short term noise...Next PCE/CPI report will dictate the immediate future. UK inflation just shot back up after falling for 3 months straight. Not saying we'll follow but the Fed can charge course on one hot/soft data point. Therefore all these future forecasts and dotplots are futile and unreliable.

So the short answer - nobody knows , long answer - nobody knows. Grab a solid 5% return if you can get it and ride it out.

lou | Mar 22, 2023 | 1,004 posts since 2010

Sams, I agree nobody knows, including our inestimable Fed Chairman. However, there is probably an equal chance 5-yr rates could be 6% or 4% in 6 months. I don't disagree that purchasing 5 yr 5% CDs is probably a good move but that doesn't mean we will be happy about it in the not too distant future.

sams1985 | Mar 22, 2023 | 781 posts since 2022

Lou, great point and i agree with you- have to be mentally prepared to know that if you lock in now, you're either going to be relieved you did or extremely disappointed..but gotta pull the trigger at some point..5% was the minimum threshold for me and right in my comfort zone.

If they go to 6% i'll have left a ton of money on the table, but on the flip side if they go back down to 4% i'll also have left a ton of money on the table by not locking in. Either way it's done now and i gotta live with it!

John19 | Mar 22, 2023 | 397 posts since 2022

What I've bought so far:
150,000 Discover 4.9% five year brokered CD
75,000 Bread Financial 4.75% five year CD
125,000 Sallie Mae 4.55% five year CD
150,000 Capital One 4.40% five year CD
100,000 GTE 4.80% five year CD
250,000 Ally 4.35% five year CD (the real stinker)
150,000 Morgan Stanley 4.9% five year brokered CD
100,000 Discover 5.0% five year brokered CD
50,000 UBS 4.6% five year brokered CD (another stinker)
100,000 Amex 4.75% five year brokered CD (panic bought)

Thank god I'm not married or my wife would leave me as a loser. Worst thing was only getting 100k 5%. I still got plenty of money left. It is what is is, I'm happy with it. But I'm only buying six month EWP CDs from here on out. Don't laugh at me.

sams1985 | Mar 23, 2023 | 781 posts since 2022

John19,

Nothing to feel bad about at all...that's a really respectable portfolio-you're looking at almost 5 grand a month already. How do you keep track of all those accounts?? I also have a 250k stinker from Capital one @ 4.3% 60 month. Bought back when i didn't know much about CD's and got excited when rates went over 4% and there was hysteria on here. It's so hard to time the peak, particularly in this cycle bc everything is so unpredictable. Think about this way- a year ago we were dreaming of these returns. And if rates do rise, at least you still have plenty of funds left to work with. I've exhausted almost all so i bet the kitchen sink on inflation cooling.

I noticed you didn't open an account with All in CU yet? It was actually really easy. I did it before
all the brokered Cd's showed last week and i was planning on buying the jumbo. All of my Cd's are brokered except for GTE Financial 500k @ 4.8% 60 month. Wish i had waited a few days and joined All in CU and gotten the 5.05% Jumbo. I bought 500k of the 5% 60 month discover and 500k of the Synchrony 5% 60 month.

In retrospect I probably should have done 450k bc they pay semi-annually and if they do somehow default i wont be reimbursed for any pending interest-didn't think about at the time but oh well it is what it is. I also picked up some of the University bank @ 4.85% brokered b/c it pays monthly and some of the Morgan Stanley as well. I have a bit left and am going to see what happens with the PCE next week and probably put the rest into the ALL in CU jumbo and then i'll be officially done. I've been stressed since November chasing these rates...can't wait for it to be finally over and i can enjoy the next 5 years.

John19 | Mar 23, 2023 | 397 posts since 2022

With all the banking drama I've been reluctant to put to put a lot of money in smaller CU's like All In/GTE. I just want to ensure that I get the high rate for five years, no matter what happens. Only very strong banks from now on. I'm kind of worried about that semi-annual interest now, those are all the brokered CDs I'm going to buy. Hopefully some more good direct CDs with low EWP will show up again.

John19 | Mar 22, 2023 | 397 posts since 2022

I've bought all the brokered CDs I'm willing to buy so if they go higher, I'm hurting. I'll probably just wait until either Barclays or Alliant drop their long-term rates and then buy one or the other. If they go up that will buy me time. I want a low EWP at a strong bank even if the rates are lower than some other CU.

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