The precondition for knowing when the Federal Reserve stops raising rates - page 2.

Wind_FURY

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Quote from: Sayeds56 on May 09, 2023, 06:15:04 AM

Quote from: be.open on May 09, 2023, 04:07:44 AM

The unemployment rate is not a condition, but rather one of the indicators. It is difficult to be effective in the fight against inflation with a low level of unemployment, because, experiencing a shortage of free personnel, enterprises are forced to fight for them by raising wages, and this, in turn, continues to spin the flywheel of inflationary expectations. So yes, you're right - as long as US unemployment remains low, you can continue to expect interest rates to rise or stay the same until enough businesses fail or go through massive layoffs.

You are correct that unemployment rate is an indicator which reflects the overall health of economy, how lower unemployment rate rate can directly impact inflation as it can create upwards pressure on wages as employers complete for a smaller pools of available workers.

Someone has been learning! You're just one of the very few in the forum who truly got the concept. The majority of people have been gaslighted by the misinformation and gaslighting being spread in the media.

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Inflation is a complex economic phenomenon, that can be influenced by many factors, but I think oil price play main role in its escalation. therefore, if oil prices were start to falling significantly, it could potentially ease inflationary pressure and lead to a pause in interest rates increase.

It's a MONETARY phenomenon. The "supply side inflation" narrative doesn't explain why inflation is sticky. Simple good sense will tell us that if there's too much money in circulation = more demand.

Sayeds56

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Quote from: be.open on May 09, 2023, 04:07:44 AM

The unemployment rate is not a condition, but rather one of the indicators. It is difficult to be effective in the fight against inflation with a low level of unemployment, because, experiencing a shortage of free personnel, enterprises are forced to fight for them by raising wages, and this, in turn, continues to spin the flywheel of inflationary expectations. So yes, you're right - as long as US unemployment remains low, you can continue to expect interest rates to rise or stay the same until enough businesses fail or go through massive layoffs.

You are correct that unemployment rate is an indicator which reflects the overall health of economy, however, lower unemployment rate rate can directly impact inflation as it can create upwards pressure on wages as employers complete for a smaller pools of available workers.

Inflation is a complex economic phenomenon, that can be influenced by many factors, but I think oil price play main role in its escalation. therefore, if oil prices were start to falling significantly, it could potentially ease inflationary pressure and lead to a pause in interest rates increase.

Wind_FURY

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Quote from: be.open on May 09, 2023, 04:07:44 AM

Quote from: Wind_FURY on May 09, 2023, 01:57:39 AM

High unemployment. I'm talking about high unemployment in the United States, and a recession there has always caused a contagion across the world.

It's not merely an opinion that the reason why Jerome Powell can't stop raising rates because of "sticky inflation", and "sticky inflation" will only go down if consumer demand goes down. But how does it go down? It will only go down if people lose their jobs, symptom of a recession. BUT unemployment is still very low, which means Jerome Powell will keep raising rates until there isn't enough money in circulation for companies to pay the wage-earners their salaries.

The unemployment rate is not a condition, but rather one of the indicators. It is difficult to be effective in the fight against inflation with a low level of unemployment, because, experiencing a shortage of free personnel, enterprises are forced to fight for them by raising wages, and this, in turn, continues to spin the flywheel of inflationary expectations. So yes, you're right - as long as US unemployment remains low, you can continue to expect interest rates to rise or stay the same until enough businesses fail or go through massive layoffs.

But it's the primary indicator, and it's actually common sense, and it's the reason why the Federal Reserve is tightening the money supply. The other two posters don't get it, but I'm very confident they will when everything starts to unwind.

The Federal Reserve won't say it out loud in public, but what do rate hikes' actually do? Kill demand and it cannot be achieved without a high unemployment rate.

Check these charts. Teal = Fed Funds Rate, Orange = CPI, Blue = Unemployment Level.

Observe that after the Federal Reserve's rate hikes, high unemployment peak followed a year at least later. It happened during Volker's time during 1983 and Bernake's time during 2009/2010. Powell's time is coming, let's observe what happens for the rest of 2023.

EarnOnVictor

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Quote from: Wind_FURY on May 09, 2023, 01:57:39 AM

High unemployment. I'm talking about high unemployment in the United States, and a recession there has always caused a contagion across the world.

It's not merely an opinion that the reason why Jerome Powell can't stop raising rates because of "sticky inflation", and "sticky inflation" will only go down if consumer demand goes down. But how does it go down? It will only go down if people lose their jobs, symptom of a recession. BUT unemployment is still very low, which means Jerome Powell will keep raising rates until there isn't enough money in circulation for companies to pay the wage-earners their salaries.

You are getting the whole point wrong. If you are using the unemployment status of the US for the reason why the FED is hiking the rate and using job cuts as a solution to high demands, then you are contracting yourself as this is still leading to more unemployment aside from the fact that it's not the solution.

The reason why FED has been hiking Federal Funds Rate since late 2021 and become so aggressive since 2022 is nothing but a rise in inflation. Inflation should naturally cut demands because you now have lesser value for your money as against your narration. However, what causes inflation might be deeper than anyone could imagine, but of course, this present one is global, so it's a chain reaction that is not peculiar to the US.

The solution to this, and of course what will stop the rate hike and perhaps start forcing FED to cut rates is when the Consumer Price Index, Producer Price Index and Core PCE Price take the downturn. This is when the retail sales and Core Retail sales start to increase, then FED can begin cutting the rate or holding it.

be.open

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Quote from: Wind_FURY on May 09, 2023, 01:57:39 AM

High unemployment. I'm talking about high unemployment in the United States, and a recession there has always caused a contagion across the world.

It's not merely an opinion that the reason why Jerome Powell can't stop raising rates because of "sticky inflation", and "sticky inflation" will only go down if consumer demand goes down. But how does it go down? It will only go down if people lose their jobs, symptom of a recession. BUT unemployment is still very low, which means Jerome Powell will keep raising rates until there isn't enough money in circulation for companies to pay the wage-earners their salaries.

The unemployment rate is not a condition, but rather one of the indicators. It is difficult to be effective in the fight against inflation with a low level of unemployment, because, experiencing a shortage of free personnel, enterprises are forced to fight for them by raising wages, and this, in turn, continues to spin the flywheel of inflationary expectations. So yes, you're right - as long as US unemployment remains low, you can continue to expect interest rates to rise or stay the same until enough businesses fail or go through massive layoffs.

royalfestus

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Quote from: Wind_FURY on May 09, 2023, 01:57:39 AM

High unemployment. I'm talking about high unemployment in the United States, and a recession there has always caused a contagion across the world.

It's not merely an opinion that the reason why Jerome Powell can't stop raising rates because of "sticky inflation", and "sticky inflation" will only go down if consumer demand goes down. But how does it go down? It will only go down if people lose their jobs, symptom of a recession. BUT unemployment is still very low, which means Jerome Powell will keep raising rates until there isn't enough money in circulation for companies to pay the wage-earners their salaries.

High unemployment in the United States is a complex issue with various factors affecting it. It cannot be solely attributed to Jerome Powell's decision to raise interest rates. The Federal Reserve's monetary policy decisions are based on a wide range of economic indicators, including employment levels, inflation, and economic growth, and the primary goal is to promote maximum employment and stable prices.

Wind_FURY

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High unemployment. I'm talking about high unemployment in the United States, and a recession there has always caused a contagion across the world.

It's not merely an opinion that the reason why Jerome Powell can't stop raising rates because of "sticky inflation", and "sticky inflation" will only go down if consumer demand goes down. But how does it go down? It will only go down if people lose their jobs, symptom of a recession. BUT unemployment is still very low, which means Jerome Powell will keep raising rates until there isn't enough money in circulation for companies to pay the wage-earners their salaries.

Quote

Teal = Fed Funds Rate, Orange = CPI, Blue = Unemployment Level.

Observe that after the Federal Reserve's rate hikes, high unemployment peak followed a year at least later. It happened during Volker's time during 1983 and Bernake's time during 2009/2010. Powell's time is coming, let's observe what happens for the rest of 2023.

Topic: The precondition for knowing when the Federal Reserve stops raising rates - page 2. (Read 236 times)