Interest rates in US, your take

[SilverCryptoBullet]

Trump can not fire Powel and he has no power to control what Powel does. Trump only can make noise on media and US society to indirectly create pressure on Powel. So far there is no signal that Powel will be beaten by any pressure and he is more obsessed with what happened decades ago as consequence of too early rate cut. Then, the recession return and rate had to be risen again and as consequence of a second wave of rate increase, things got worse dramatically with two spikes from 1980 to 1985.

https://fred.stlouisfed.org/series/FEDFUNDS

[m2017]

How will this play out? Will inflation be contained, rates lowered? Could we be heading for stagflation? Is the future pinkish?

In current financial system, inflation is inevitable. Moreover, inflation will only increase. Trump wants to force the Federal Reserve to launch a "mad printer" and I am sure he will achieve this. This means that a new flow of dollars will be thrown into the US and world financial system, increasing their total number, and also reducing the value of each individual dollar. That is, what is called inflation. I would not call this future pinkish, because the consequences of this inflation will have to be "sponsored" by each of us. Prices for everything will rise, and those savings in money who have them will lose part of their "value". Therefore, you can't keep "value" in the form of money, because it is unprofitable.

[davis196]

despite Trump saying that other countries will pay them, they are likely to end in the final price paid in the US

Trump doesn't know how the tariffs work. He's not the most competent person when it comes to economics.

the fact is that some companies will invest in the US - which means more money into the economy, which means... inflationary pressure.

It's actually the opposite. More foreign investors in the US means a stronger dollar, which means lower inflation. Foreign investments can have a long term deflationary effect over the economy. Trump recently made deals with Saudi Arabia and UAE, which might be a good thing for the USA.
The FED chairman is doing the right thing. The US economy doesn't need rate cuts right now. The crypto community might be disappointed by this fact, because lower interest rates means higher cryptocurrency prices.

[EarnOnVictor]

Trump has been lately calling repeatedly Jerome Powel, chair of the fed, Mr. Too Slow.

It's time we don't take Trump seriously again, he has demonstrated himself to be tyrannical, egotistic and controlling, everybody must see things in his ugly way and must do it, for what reason? I love what the FED under Jerome Powell is doing, and I believe every sane mind stands with him, at least those who are not in Trump's authoritarian camp.

Tell me, how do you cut the interest rate when Trump was causing uncertainty with his ignoble policies, especially the trade war with tariffs? Now, the US interest rate is increasing, is this the time Powell should cut the rate? Trump should go back to his economics and leave the lawfully autonomous body alone to do their job. Everything mustn't be about how Trump wants it.

[bitgolden]

Cutting the rates will not make you go into a great economy suddenly, it may cause inflation I agree with that. The reason why he hasn't done that is because he is scared. The question is, is he right to be scared or not?

So if you cut the rates, then it won't be stagflation and you will do better, unless it causes inflation. So the question is this; would cutting rates cause inflation or are we beyond that now? I am not sure, and you can't be sure, we are just some forum members here, these guys are big economic brains that are in charge of the biggest economy of the world, I have to trust that Powell knows better than I do and he will do the right thing. Plus, I don't care because I am not American . So, it's fine for me lol.

[paxmao]

despite Trump saying that other countries will pay them, they are likely to end in the final price paid in the US

Trump doesn't know how the tariffs work. He's not the most competent person when it comes to economics.

the fact is that some companies will invest in the US - which means more money into the economy, which means... inflationary pressure.

It's actually the opposite. More foreign investors in the US means a stronger dollar, which means lower inflation. Foreign investments can have a long term deflationary effect over the economy. Trump recently made deals with Saudi Arabia and UAE, which might be a good thing for the USA.
The FED chairman is doing the right thing. The US economy doesn't need rate cuts right now. The crypto community might be disappointed by this fact, because lower interest rates means higher cryptocurrency prices.

I do not see that. Inflation is roughly regulated by the demand of money versus the supply of money. More investment in the US would be mostly inflationary in my view as there would be greater demand for the USD.

This happened in the EU in every country in which the EU funds were allocated - all costs soared, particularly housing.

I do get what you mean in the sense of stronger USD balancing the external deficit and it could reduce inflation. However, I think it applies only if those investments are driving up productivity and competitivity (which in the end is what may drive inflation down from the demand side), but in these case the investments are not "productive", they are artificially created by raising tariffs?

[Unknown Op]

despite Trump saying that other countries will pay them, they are likely to end in the final price paid in the US

Trump doesn't know how the tariffs work. He's not the most competent person when it comes to economics.

the fact is that some companies will invest in the US - which means more money into the economy, which means... inflationary pressure.

It's actually the opposite. More foreign investors in the US means a stronger dollar, which means lower inflation. Foreign investments can have a long term deflationary effect over the economy. Trump recently made deals with Saudi Arabia and UAE, which might be a good thing for the USA.
The FED chairman is doing the right thing. The US economy doesn't need rate cuts right now. The crypto community might be disappointed by this fact, because lower interest rates means higher cryptocurrency prices.

I think trump deal with Saudi Arabia but cryptocurrency has its own Market and Trump can't dump this and we are watching good pump in the market and that is trendy as Trump was not in the War but he interrupted in that . In USA interest rates will be more as we saw in the past but it will be less for rich people because Trump want to give facilities to rich people. Trump is one of the richest guy and always deal with rich countries and he will get favour from rich countries and he don't like poor countries and did not visit any poor country.America interest rate for people will not go decline and banks will give money and they will get more interest with time as they want to do their business and want to earn money.

[pooya87]

It's actually the opposite. More foreign investors in the US means a stronger dollar, which means lower inflation.

It depends on where that money goes.

Trump recently made deals with Saudi Arabia and UAE, which might be a good thing for the USA.

That was a rip off just like last time. As a reminder, ~8 years ago when Trump was new in office he did travel to meet with Arab dictators and promised receiving trillions of dollars of investment. Only about 1%-10% of it was actually fulfilled and most of it was weapons they bought (so the money went to American arms dealers) and that didn't change anything in US economy and it won't this time either.

[justdimin]

Cutting the rates will not make you go into a great economy suddenly, it may cause inflation I agree with that. The reason why he hasn't done that is because he is scared. The question is, is he right to be scared or not?

So if you cut the rates, then it won't be stagflation and you will do better, unless it causes inflation. So the question is this; would cutting rates cause inflation or are we beyond that now? I am not sure, and you can't be sure, we are just some forum members here, these guys are big economic brains that are in charge of the biggest economy of the world, I have to trust that Powell knows better than I do and he will do the right thing. Plus, I don't care because I am not American . So, it's fine for me lol.

That is definitely a tough one, I definitely agree with that, it's definitely a huge issue and not sure if we can trust that or not. I know that it is going to be a tough one, and I know it is not known and because of that, we can't really decide on which one would be better. But they can't keep the rates same forever just because they fear inflation.

With time, you should be fine with a small bit of increase on inflation, you can't have 9% inflation, you could have 5-7% whatever, and that means they have to increase inflation a bit at times if they have to, and because of that you are going to see rates going down. If he doesn't, next one will do it and we will see the rates cut, and maybe even over 10% inflation at first, but market will get used to it.

[paxmao]

It's actually the opposite. More foreign investors in the US means a stronger dollar, which means lower inflation.

It depends on where that money goes.

Trump recently made deals with Saudi Arabia and UAE, which might be a good thing for the USA.

That was a rip off just like last time. As a reminder, ~8 years ago when Trump was new in office he did travel to meet with Arab dictators and promised receiving trillions of dollars of investment. Only about 1%-10% of it was actually fulfilled and most of it was weapons they bought (so the money went to American arms dealers) and that didn't change anything in US economy and it won't this time either.

The Arab Emirates and Saudi Arabia among other are well known to say whatever they want and then pay - or not pay - whenever they want. There is very little chance of getting them to comply with any comittment whatsoever. Trump is just doing the usual marketing and travelling at the expense of the US taxpayers. Whatever he is up to there, he would be better of meeting Netanyahu and getting the war to end.

[pooya87]

The Arab Emirates and Saudi Arabia among other are well known to say whatever they want and then pay - or not pay - whenever they want. There is very little chance of getting them to comply with any comittment whatsoever.

Not to the US. Trump said one thing right, without US they won't even last 2 weeks. They are illegitimate family dictatorships that are usurpers of Arab lands. Without US support and without CIA suppressing any kind of uprising and executing people, the Arabs would overthrow them in a heartbeat.

If US says jump, they will only ask how high. Specially Saudis and specifically bin Salman since these days it looks like that the dictator Salman is dead and bin Salman needs US support to replace the dictator. He has been eliminating the replacements already one of them was actually CIA's choice to replace the dictator Salman...

The reason why these agreements aren't fulfilled to the amount that is advertised in the mainstream media is not because these dictators aren't complying with it, but instead it is because these dictators don't have that kind of money to give. They have wasted a lot of it already (eg. for  invading Yemen, Saudis wasted $500+ billion which was almost all their foreign exchange reserves) and the money they have left was invested in the US already.


They are also setting record high budget deficits that will grow even bigger if oil price goes any lower (they've set their budget based on oil at $80 to $90 while oil is currently at $60) and record high unemployment and various other economic problems that the authoritarianism may not be able to keep in check in the future as things get worse.
In other words they will have even less money to pay Trump in ransom this time around...

Trump is just doing the usual marketing and travelling at the expense of the US taxpayers. Whatever he is up to there, he would be better of meeting Netanyahu and getting the war to end.

Agree.

[Pablo-wood]

From my stand point Powell isn’t just dragging his feet on cutting interest rates, he's responding to how persistent high inflation keeps glaring. Cutting rates will obviously make borrowing cheaper and inturn spending becomes very easy but the impact will hit heavily on the economy.


In my opinion before pushing for rate cuts, Trump should prioritize addressing inflation and its impact on the economy.  We should also consider, while a cut might give the crypto market a temporary boost, it could worsen the overall cost of living. Long-term stability should take precedence over short-term market gains.

[paxmao]

From my stand point Powell isn’t just dragging his feet on cutting interest rates, he's responding to how persistent high inflation keeps glaring. Cutting rates will obviously make borrowing cheaper and inturn spending becomes very easy but the impact will hit heavily on the economy.


In my opinion before pushing for rate cuts, Trump should prioritize addressing inflation and its impact on the economy.  We should also consider, while a cut might give the crypto market a temporary boost, it could worsen the overall cost of living. Long-term stability should take precedence over short-term market gains.

Yep. Trump can threaten and cow people into following his politics and convince a large number of discontent US citizens to vote for him. If you see WHO votes for Trump, you will notice that is the regions that actually do NOT contribute to the US GDP that much. Whereever there are richer regions with a well-educated workforce they did not vote for Trump.

However Trump cannot threaten numbers and cannot make the debt go away, nor the risk of recessions nor everything that comes with the aggressive stance towards any and all taken with tariffs.

When the US citizen has to pay the groceries and the FED does the numbers, there is no XTweeting or posting or name-calling enough to stop the problem. Hard facts are arriving, and there are more to come.

[STT]

Trump can not fire Powel and he has no power to control what Powel does.

I'd agree on the second point and on both points it would be self destructive in any case.   Powell is not under direct control is an important principle by which the Dollar stands separate from the twisted road the fiscal budget walks, if FED were merely a puppet the cost to tax payers in debt and many respects would be higher and outweigh any benefits.

I think Trump could replace or jolt the Federal reserve in some way but it would be destructive to intervene without proper justification and the means to replace a FED chief I believe does require some level of proven incompetence.
   Not many people believe Powell to be incompetent or even incorrect in most decisions, he walks a tightrope easy to fall from and arguably nothing he does will be seen as perfect  but for most its acknowledged a separated rate policy is the best path to continue with.
   I think eventually the government and their fiscal deficit will be found to be most at fault rather then the Federal reserve policy which is mostly trying to balance that failure to reverse and repay debts.

I think we're going to double digit rates personally and only exceptional growth and/or government positive policy on their debt perhaps globally would alter my view on that trajectory.

[Webetcoins]

The Arab Emirates and Saudi Arabia among other are well known to say whatever they want and then pay - or not pay - whenever they want. There is very little chance of getting them to comply with any comittment whatsoever.

Not to the US. Trump said one thing right, without US they won't even last 2 weeks. They are illegitimate family dictatorships that are usurpers of Arab lands. Without US support and without CIA suppressing any kind of uprising and executing people, the Arabs would overthrow them in a heartbeat.

If US says jump, they will only ask how high. Specially Saudis and specifically bin Salman since these days it looks like that the dictator Salman is dead and bin Salman needs US support to replace the dictator. He has been eliminating the replacements already one of them was actually CIA's choice to replace the dictator Salman...

The reason why these agreements aren't fulfilled to the amount that is advertised in the mainstream media is not because these dictators aren't complying with it, but instead it is because these dictators don't have that kind of money to give. They have wasted a lot of it already (eg. for  invading Yemen, Saudis wasted $500+ billion which was almost all their foreign exchange reserves) and the money they have left was invested in the US already.


They are also setting record high budget deficits that will grow even bigger if oil price goes any lower (they've set their budget based on oil at $80 to $90 while oil is currently at $60) and record high unemployment and various other economic problems that the authoritarianism may not be able to keep in check in the future as things get worse.
In other words they will have even less money to pay Trump in ransom this time around...

The weird thing is, a nation like Saudi Arabia for example, has a ton of money, and all of that money, basically everything, is owned by one family, the kings family.

And nobody really feels bothered by it, they just live like that, or they have no idea to riot or rebel, the military itself is questionable one here, in most of other nations, military is the one that takes over, and then gives democracy. I do not know their customs or cultures, and if they find that to be acceptable then they deserve to live like that, but if it was my nation, I would be rebelling against a king that owns all the good in my nation.

USA definitely has their finger in there somewhere, and if Saudis ever go against the USA, they would lose in a heart beat, they would have no chance to survive, and no need for a war neither, they could just ban them from selling oil to all it's allies, and Saudis would crash in a week.

[takuma sato]

The Arab Emirates and Saudi Arabia among other are well known to say whatever they want and then pay - or not pay - whenever they want. There is very little chance of getting them to comply with any comittment whatsoever.

Not to the US. Trump said one thing right, without US they won't even last 2 weeks. They are illegitimate family dictatorships that are usurpers of Arab lands. Without US support and without CIA suppressing any kind of uprising and executing people, the Arabs would overthrow them in a heartbeat.

If US says jump, they will only ask how high. Specially Saudis and specifically bin Salman since these days it looks like that the dictator Salman is dead and bin Salman needs US support to replace the dictator. He has been eliminating the replacements already one of them was actually CIA's choice to replace the dictator Salman...

The reason why these agreements aren't fulfilled to the amount that is advertised in the mainstream media is not because these dictators aren't complying with it, but instead it is because these dictators don't have that kind of money to give. They have wasted a lot of it already (eg. for  invading Yemen, Saudis wasted $500+ billion which was almost all their foreign exchange reserves) and the money they have left was invested in the US already.


They are also setting record high budget deficits that will grow even bigger if oil price goes any lower (they've set their budget based on oil at $80 to $90 while oil is currently at $60) and record high unemployment and various other economic problems that the authoritarianism may not be able to keep in check in the future as things get worse.
In other words they will have even less money to pay Trump in ransom this time around...

Trump is just doing the usual marketing and travelling at the expense of the US taxpayers. Whatever he is up to there, he would be better of meeting Netanyahu and getting the war to end.

Agree.

Where did Trump say that? Im not sure what these weird power relationships are with the middle east. As we know, Israel remains a main ally of the US, and US keeps doing whatever Israel demands, with no or very little compromise of Israel's government. I don't understand why the US is supporting the thing that's going on at Gaza, however you want to call it, it seems clear the Israel army is overreaching, but somehow the US keeps collaborating, as well as the EU, but at least the EU has shown now some opposition, but all presidents of the US keep supporting Israel no matter what, specially the left for some reason. Netanyahu could be filmed dropping a bomb on some refugee camp and they would still defend it. Sure what Hamas did on October 7th is insane but you are supposed to not act like these animals and it's been a while Israel has been going too far. So I don't see why the Saudis should do whatever the US wants in the future. These alliances come and go. Now the Saudis may see some convenient business with the US, but in the future they may ally with China for a bigger deal. You never know. All I know is Bin Salman killed an opposite with a chainsaw and now all these politicians are dealing with him as nothing happened, because money and power apparently solves anything. Same as we saw with the nazis after WW3 getting jobs at the NASA, or the islamic terrorist becoming a "respectable politician" that wears a suit as president of Syria. Life is a comedy.

[Odohu]

There is no straight answer to some of the issues raised here because there have never been a time a new regime announced tarrif on foreign goods to the extent that it almost appear he is at economic war with other countries. The outcome of Trump's decision will only manifest with time but what I noticed is that is beginning to realised that he should take things a bit slow because he collapse the US economy and cause the citizens to revolt.

He has good plans for the US and his approach of pulling investments to the US will surely yield good fruits but right now, he need to pressure JP to lower the interest rates to make things easier for the average citizen. I'm even surprised that Trump did not sack him as it was once rumoured. 

[Smartprofit]

Here, in my opinion, it is necessary to understand that the reduction of the Fed's interest rate is a medicine for the economy.

And like any medicine, it is used only if a serious problem in the economy has been diagnosed. This medicine is not used just like that. Because if it is used just like that, then when there is a real strong need to use it, it will be impossible to use it. Now the Fed's management consists of very conservative financiers who avoid all sorts of adventures and sudden movements. Therefore, in my opinion, they will not reduce the Fed's interest rate.

After all, there is no particular need for this. The story with tariff duties seems to be ending. The US economy is in better shape than the economy of the European Union, Russia or China.

In this situation, there is no reason to reduce the Fed's interest rate, moreover, under certain economic scenarios it may even be slightly increased (such a development of events cannot be completely ruled out either).

[takuma sato]

I think Donald Trump is pushing it a bit and using this as marketing to boost his popularity, since lower rates stimulate consumption and give a false sense of prosperity. I believe the Fed chairman is doing what needs to be done. We’re still feeling the financial impact caused by the pandemic. Interest rates will come down sooner or later, but any rate cut needs to be done responsibly.

But it's very unpopular for Trump to have interest rates high, specially the US30Y since that is what affects most people with mortgages, and not only for low and middle class, which I doubt he cares that much, but for the rich guys in real state that use leverage in order to buy more properties in the form of very spaced out mortgages, so often that US30Y is going to impact these guys too in their ability to expand their business, and Trump being a real state guy probably has his phone fuming and a lot of people want these rates down ASAP. So it's a problem if inflation goes up since obviously prices go up, and it's a problem if rates stay elevated since people with mortgages will have to pay more. So the government and the FED are in this situation and it will have to give one way or another. I think the printing eventually begins and BTC moons.

[paxmao]

Here, in my opinion, it is necessary to understand that the reduction of the Fed's interest rate is a medicine for the economy.

And like any medicine, it is used only if a serious problem in the economy has been diagnosed. This medicine is not used just like that. Because if it is used just like that, then when there is a real strong need to use it, it will be impossible to use it. Now the Fed's management consists of very conservative financiers who avoid all sorts of adventures and sudden movements. Therefore, in my opinion, they will not reduce the Fed's interest rate.

After all, there is no particular need for this. The story with tariff duties seems to be ending. The US economy is in better shape than the economy of the European Union, Russia or China.

In this situation, there is no reason to reduce the Fed's interest rate, moreover, under certain economic scenarios it may even be slightly increased (such a development of events cannot be completely ruled out either).

My view is a bit of the opposite. Actually raising interests rates is the medicine that needs to be applied when the inflation gets too high. Otherwise, and provided there is no reasonable risk of deflation, the best course is to have cheap money and allow the economy to grow as much as possible - again, if there is no risk of inflation.

There is no limit to how much you'd want the economy to grow as long as it does not overheat.