Yahoo Finance Federal Reserve pushes interest rates above 5% for first time since 2007

O

oldmontana

Senior Member
Location
Montana
Needed? The hope is it will slow inflation.

What say you?

I see you can get over 5% on short term CD's.
 

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There really are no free rides in this world. Yes, you can raise the interest rates and a lot of folks will stop buying the frills like expensive holidays or going out to restaurants.

We just had an interesting situation here in Canada. Many of the government employees went on strike for a week or so due to not having a contract for the last 2 years. Now the strike is over and they are back to work.

So, I'm saying that higher interest rates will slow inflation but giving higher wages will not. The reason is that the higher the wage, the higher the taxes and the more things cost. For example, give all working people a minimum wage of $50/hour. That's nice but then your cup of coffee at McDonald's suddenly becomes $12/cup. How does that grab you?

I know people want a "living wage" and they should get it. However, there are the so called "snowball" effect of constant strikes over wages and working conditions. I'm 77 years old and I don't have the answer. Maybe you do?
 
Packerjohn said:
There really are no free rides in this world. Yes, you can raise the interest rates and a lot of folks will stop buying the frills like expensive holidays or going out to restaurants.

We just had an interesting situation here in Canada. Many of the government employees went on strike for a week or so due to not having a contract for the last 2 years. Now the strike is over and they are back to work.

So, I'm saying that higher interest rates will slow inflation but giving higher wages will not. The reason is that the higher the wage, the higher the taxes and the more things cost. For example, give all working people a minimum wage of $50/hour. That's nice but then your cup of coffee at McDonald's suddenly becomes $12/cup. How does that grab you?

I know people want a "living wage" and they should get it. However, there are the so called "snowball" effect of constant strikes over wages and working conditions. I'm 77 years old and I don't have the answer. Maybe you do?
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Yes, with the increase in wages I think that we will continue to see higher inflation. But something has to be done and I think that raising interest rates is the way to go. Will it hurt me, yes it already has.
 

the fed has a history of over doing things both up and down …

watch them scramble to cut rates to avoid being another japan as the banking crises worsens and we have more signs of recession.

the bond markets are betting the fed is wrong in still raising and the worlds bond investors have been driving rates lower .

the ten year treasury was over 4-1/2% and is now in the 3-1/2% range.

that is a 25% drop in rates.

the 30 year rates are down even more.

personally i am hedged either way owning both very short term and long term treasuries
 
Pepper said:
Too late, I'm broke, but will be investing in a few CDs
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If you are looking to lock in current rates, a 3+ year fixed annuity would be better than a CD. CD's tend to mature in shorter timeframes so there may be volatility in the rates as your CD 's mature that could trend down. Locking in at a higher rate for a longer amount of time is a better route. Also, CD's tend to payout at maturity. With some Annuities you can opt in for interest payments monthly if you want a steady income stream while protecting principal....just a different viewpoint
 
mathjak107 said:
the fed has a history of over doing things both up and down …

watch them scramble to cut rates to avoid being another japan as the banking crises worsens and we have more signs of recession.

the bond markets are betting the fed is wrong in still raising and the worlds bond investors have been driving rates lower .

the ten year treasury was over 4-1/2% and is now in the 3-1/2% range.

that is a 25% drop in rates.

the 30 year rates are down even more.

personally i am hedged either way owning both very short term and long term treasuries
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Yes, that is why I think after this .25 increase, there may be a smaller one as we near recession later this year, but they could drop quickly after that. Locking in higher rates now, or soon, is a good idea for long term interest rates as the Fed moves up and down.
 
well it’s right in there with the other etfs that are listed ont the fixed income side .

now you know about an etf you weren’t aware of .

shy is one of the most popular 1-3 year etfs
 
mathjak107 said:
well it’s right in there with the other etfs that are listed ont the fixed income side .

now you know about an etf you weren’t aware of .

shy is one of the most popular 1-3 year etfs
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I am very well aware of ETF's. I have 250K in ETF's. Why do you assume I don't know about ETF's, and no, they are not 'fixed income' at all. Company price points fluctuate greatly sometimes, and dividends are not 'fixed', at all. Sounds like you don't know what a fixed income investment instrument is.
 
i never said you are not familiar with etfs ..i said now you learned about one you never heard of which is SHY.

so now i don’t know what fixed income investment are ? do you just like to make things up .

why would you even say that

sgov , shy and tlt are ALL FIXED INCOME INVESTMENTS

you do know fixed income includes bond funds and bond etfs i hope .

otherwise why would you say what you said , that i don’t know what fixed income is.

that makes no sense
 
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I thought I would just post this here, because it's related to rising interest rates as they relate to inflation. The rate of inflation has slowed for the 10th straight month. Anyone occasionally watching the news knows this. But I've been watching inflation slow (in the news), while not realizing any actual benefit, but today I bought a dozen eggs for $1.65, which is less than half of what I paid for a dozen the last time I bought them at the same store. This is also odd because of all the commodities used to track inflation, groceries are the one area where no slowing showed up last month. Of course anomalies in any statistical analysis are always going to be present.

I was standing by the produce and a lady and I were complaining about the price of tomatoes. She peeked in my basket and asked if I was going to buy eggs, which she said were $1.65. I didn't need any at the moment, but I went and bought a dozen anyway because it seemed like such a good deal, so I guess it's omlets for a while. This is the first sign I've seen that we may actually be turning the corner. And I'm welcoming that.
 
most of the inflation we are seeing is push pull inflation not monetary..unless the fed can lay eggs , or open capped oil wells or farm and pick fruit that is dying from lack of workers this is all supply chain issues….it can’t be fixed by rates

only supply chain fixes will solve it.

in the case of eggs avian flu has run its course so eggs are plentiful again
 
mathjak107 said:
most of the inflation we are seeing is push pull inflation not monetary..unless the fed can lay eggs , or open capped oil wells or farm and pick fruit that is dying from lack of workers this is all supply chain issues….it can’t be fixed by rates
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This time around supply chain probably does play a bigger role, but I think both factor in and probably other factors as well. Either way, I'm still happy to see progress, whatever the cause.
 
Sippican said:
Love the higher interest rates!
Opened a 7 year fixed annuity at 5.50%, interest paid monthly.
Money Market paying 4.68%
A nice stream of income without jeopardizing principal
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Hey, Sippican, I too love the higher interest rates. For years there was almost free money. If you were a senior and had money in the bank you were poorer and poorer every year. It's high time us seniors got a break.
 
mathjak107 said:
you are more negative at 5% interest rates and 5- 9% inflation vs 1-2% inflation and zero to 1% interest
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From USA Today..
Inflation slowed for a tenth straight month in April as another drop in grocery bills offset a rebound in gasoline costs, providing some relief to Americans squeezed by a two-year run-up in prices.

Consumer prices increased 4.9% from a year earlier, down from 5% in March and a 40-year high of 9.1% last June, according to the Labor Department’s consumer price index. That's the smallest yearly increase since April 2021. On a monthly basis, prices rose 0.4% following a 0.1% increase in March.

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Makes a 5% CD look good unless you want to buy high yield investments that have risks that CD's do not have.
 
the cpi is not a personal cost of living index ..it is only a price change index that reflects changes in prices in the 1500 mini econ that make us up .

it is on many goods and services that we may have no use for .

how many times we buy something is a big factor …plus the same goods and services are higher or lower based on where you live .

higher end goods tend to show more price inflation but may last longer …

even the same area can see different prices that vary greatly .

as an example half of all rentals in nyc are rent stabilized, they saw way less in rent increases then unstabilized which averaged 15% . it’s all well and good the cpi average is lower but it means nothing to those increased 10-15% . or dealing with the food price increases we are seeing here …

wage inflation here has driven every cost of business sky high

most people likely are experiencing a higher inflation rate in higher cost areas then those in low cost areas .

so never confuse the price changes in the index which are an average across those 1500 mini economies with boots on the ground inflation which is what our personal costs are seeing

so on average we may have been better off at zero rates and lower inflation .

all one had to do is buy bonds when rates were zero and they had nice returns.

a conservative balanced portfolio did great .

so those who choose to sit in a bank account after the fed did everything but drop leaflets from helicopters telling them at least move to bonds , they paid a price.

those seniors who listened did very nicely
 
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mathjak107 said:
the cpi is not a personal cost of living index ..it is only a price change index that reflects changes in prices in the 1500 mini econ that make us up .

it is on many goods and services that we may have no use for .

how many times we buy something is a big factor …plus the same goods and services are higher or lower based on where you live .

higher end goods tend to show more price inflation but may last longer …

even the same area can see different prices that vary greatly .

as an example half of all rentals in nyc are rent stabilized, they saw way less in rent increases then unstabilized which averaged 15% . it’s all well and good the cpi average is lower but it means nothing to those increased 10-15% . or dealing with the food price increases we are seeing here …

wage inflation here has driven every cost of business sky high

most people likely are experiencing a higher inflation rate in higher cost areas then those in low cost areas .

so never confuse the price changes in the index which are an average across those 1500 mini economies with boots on the ground inflation which is what our personal costs are seeing

so on average we may have been better off at zero rates and lower inflation .

all one had to do is buy bonds when rates were zero and they had nice returns.

a conservative balanced portfolio did great .

so those who choose to sit in a bank account after the fed did everything but drop leaflets from helicopters telling them at least move to bonds , they paid a price.

those seniors who listened did very nicely
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I stated..."

Makes a 5% CD look good unless you want to buy high yield investments that have risks that CD's do not have."

What say you about that?
 
oldmontana said:
I stated..."

Makes a 5% CD look good unless you want to buy high yield investments that have risks that CD's do not have."

What say you about that?
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it is good for the instant but rates are coming down as investors bid fixed income lower and the more recession fears we have the lower rates will go .

so 5% at the moment seems fine .

but like most of the. last 40 years eventually cds return negative real returns and other investments move ahead of inflation over time.

for someone who bailed to cash the start of this year

ytd that cd is up 1.50% .

long term treasuries up 6%

gold up 12%

short term treasuries up 2.20%

total market fund up 8%

a mix of all four which is one of the most conservative portfolios in history is lower risk then that cd which is subject to tremendous inflation risk each time it comes due…

betting on cash instruments is rarely a good outcome more often then not.

because one needs to time when not to be in them and timing fails over and over .

so cds are fine for the cash or short term bond portion of a diversified portfolio but they shouldn’t be THE INVESTMENT

so that’s what i say
 

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