Wednesday, December 14, 2016

Fed Raises Rates

As expected by market traders the FOMC, the Fed's monetary policy committee has raised the target range for the federal funds rate to 1/2 to 3/4 percent rate from 1/4 to 1/2 percent.

They did not, as anticipated for most of 2016 by Austrian-lites, reverse the rate hike of December 2015, nor go negative with rates, nor launch another round of quantitative easing.

Expect even more rate hikes in 2017, that will not necessarily plunge the economy into recession.



  1. So what does this mean for the average joe?

    1. It means mortgages will be higher. That's really about it at this point. You may start seeing higher order capital goods start to lose some demand. So if the average Joe works on products that are far up the economic food chain from the mass consumer he might experience the effects of lower orders.

    2. It means hiking into a borderline recession will not do the economy any favors. Savers will benefit slightly.

  2. Well, the market didn't seem to like it today, but that can change on a dime due to factors well beyond the discounting of future earnings, cough, cough. Otherwise, not much. If you are creditworthy, you will still be able to borrow at next to nothing. If you are not, well, nothing has changed in that regard either. At the Fed's current pace (credit to EPJ commenter Jimmy Joe Meeker), it will take 18 or so years for rates to normalize. In other words, according to former Fed Chair Ben Bernanke, "no rate normalization in my lifetime." BTW, in Jan 2016, SF Fed guy John Williams predicted 6 Fed rate hikes in 2016... he was only off by 5....