Fed raises rates from 0 percent to .25 percent

[Saint Milei]

https://www.washingtonpost.com/news/wonk/wp/2015/12/16/federal-reserve-likely-to-raise-interest-rates-for-first-time-in-nearly-a-decade/

LOL as if this is even remotely a rate hike. As if the market did not already adjust for this. As if the nominal rates were still not negative. It's a fake hike.

[Ebsy]

As always, delivering insightful and cutting edge analysis.

[Negusa Nagast 🚀]

Do you know what "liftoff" is in Fed policy?

[🦀🎂🦀🎂]

should have gone negative imo

[King]

DeadPrez is just itching to send us into a recession for no reason.

Go invest in gold, bro. You would have made so much money! =|

[Cubby]

It should have been done a year or two ago, but better late than never.

After 6 long years the government is no longer penalizing those who save money. I like how I'm supposed to feel bad for people who've borrowed, they've had ZERO PERCENT for 84 months! Their free ride is over.

The recession ended in June 2009. Why did it take the Fed so long to do this? I know every time it was hinted at the Dow dropped 200 points, but there is absolutely no reason for a growing economy to have a 0% interest rate 6 years after the crisis is over. I know it was a weak recovery, but they could've raised it to say, 1% by last year.

[Clarko95 📚💰📈]

Honestly a non-event. Raising rates from 0%-0.25% to 0.25% to 0.50% is absolutely nothing in the long-run; all this affects is margins.

Short-term bank borrowing costs barely tick up, credit card/mortgage rates barely tick up as well. No one will notice much. Banks are flush with cash and still very reluctant to lend after 2008. Household debt has plunged since 2007, and falling gas prices and low borrowing costs have left people feeling wealthier than 2% wage increases would let you know.


The only thing that would be of concern is if the Fed raised them too hard, too fast (like they did 1994-1995), but with Yellen at the helm, that's not happening.

[Cubby]

You realize that the actual interest rates on loans wasn't 0% right? It was certainly low, but more like 1-2 percent depending on where. Also, spending is absolutely vital to the economy, so we should be encouraging it as much as possible. Saving money is not a risk, it doesn't really stir economic growth, and it's impossible for most people to do until they enter their 30's or 40's.

I have no idea what the interest rate was on loans. The Federal Funds rate was between 0 and 0.25%, that was what I had an issue with. They could have raised the Federal Funds rate to 1% last year or even 0.5% in 2013, but apparently the crisis wasn't over yet. I think it was more that they feared the potentially bearish Wall Street/Dow Jones reaction.

I disagree that most people can't save money until they're in their 30's or older. There are many ways to do it, some just don't want to.

[🦀🎂🦀🎂]

saving money doesn't help the economy, investing does. Why should the Fed care about "rewarding" savers - it's not like inflation is high, so the money in the bank isn't declining in value.

[King]

There's plenty of incentive in the tax code for saving for retirement, which is the only thing you should be saving for.

[Dereich]

saving money doesn't help the economy, investing does. Why should the Fed care about "rewarding" savers - it's not like inflation is high, so the money in the bank isn't declining in value.

Well, the average savings account interest rate is 0.06% and I'm 99% sure that doesn't account for inflation so your money in the bank actually IS declining in value. And its not like saved money just sits there; more savings makes it safer for banks to loan and can be counted as investment that way.

I'm not sure where I feel the right level is, but one thing the Fed considers is the personal savings rate and household debt ratio and while we're not anywhere near 2008 levels I've heard it argued that Americans are still too close to the point where one bad quarter can cause a chain reaction of defaults and foreclosures. It's not like there's no good case out there for encouraging more saving, especially if you think the economy is doing better and that further artificial pushing by the Fed will cause more harm than good.

[King]

More savings = more loans is old fashioned banking. Modern banks only care about the capital requirements they have to meet. It doesn't matter how much people are saving

[King]

If you really wanted more saving, better solution would be to make high-yield CDs tax deductible, so people have more incentive to store their money and banks have more incentive to chase after savers with good rate offers.

[Dereich]

More savings = more loans is old fashioned banking. Modern banks only care about the capital requirements they have to meet. It doesn't matter how much people are saving

That's true in theory, but banks still aren't lending to the extent that would otherwise be expected. My theory is that a larger margin of money to work with could improve that; no point in being so difficult on businesses wanting loans if you've got so much more cash to play around with anyway.

If you really wanted more saving, better solution would be to make high-yield CDs tax deductible, so people have more incentive to store their money and banks have more incentive to chase after savers with good rate offers.

That would be an issue for Congress though. Even if Fed board members did want to encourage spending, the politicians probably would not. They'd have to work with the resources they have.

[True Federalist (진정한 연방 주의자)]

An article I read today - sorry, no link as I can't remember where - mentioned that rather even where money market rates do rise in connection with this, those money market funds are likely to use the opportunity to restore some fees they suspended so as to avoid having an effectively negative rate.  We've been at zero too long.

[All Along The Watchtower]

The Federal Open Market Committee, as its composition changes, will almost certainly become significantly more "hawkish" on raising interest rates in 2016:

You must be logged in to read this quote.

Article.

[Ban my account ffs!]

There's plenty of incentive in the tax code for saving for retirement, which is the only thing you should be saving for.

Short term savings for items you need or saving to build up a rainy day fund are also legitimate reasons to save in a low interest environment.

Of course if you have decent credit, then you can always just go that route.

[Hillary pays minimum wage]

saving money doesn't help the economy, investing does. Why should the Fed care about "rewarding" savers - it's not like inflation is high, so the money in the bank isn't declining in value.

You're right about this!