Fed officials voted unanimously to lift their benchmark federal-funds rate to a range between 3% and 3.25%, a level last seen in early 2008. Nearly all of them expect to raise rates to between 4% and 4.5% by the end of this year, according to new projections released Wednesday, which would call for sizable rate increases at policy meetings in November and December.
– The Wall Street Journal
My shipment of stamps from a seller in South Africa that I had bought in July, arrived today— in a sturdy envelope covered with South African stamps.
(Very ‘meta’ to use stamps to send stamps .. and so much nicer than using a bland computer-generated postage paid label).
‘Goodbye 50, hello 100’
– Financial analyst, commenting on the expected Fed hike rate next week (in basis points)
Inflation was still above 8% in August, and pervasive, found in service sectors as well as consumer goods. Gas prices were down, but not nearly enough to offset the increases everywhere else.
I took the Wall Street Journal’s quick survey to estimate my personal inflation rate. The Bureau of Labor Statistics (BLS) has a CPI basket of 80,000 items which are grouped into categories broad (such as food) and narrow (like bananas).
The BLS revises what it tracks every two years based on the spending habits of volunteers who keep a purchase diary. Everyone’s inflation rate is a little different, of course, because we buy different things and services.
We will keep at it until we are confident the job is done.
– Federal Reserve Chair Jerome Powell, at the end of his speech in Jackson Hole, WY today.
It had to happen, of course: Fed Chair Powell reminding investors that there are several interest rate rises and probably some pain ahead, before the Federal Reserve Bank will be sure that inflation is under control.
Hopefully the selling today was mostly done by fund managers— not individual investors. The best advice on down days like today: do nothing.
The House passed the massive piece of legislation called the Inflation Reduction Act today (the Senate had already passed it). There are lots of really good stuff in it.
John Cassidy writes for The New Yorker magazine: The Inflation Reduction Act contains the biggest effort to tackle climate change that the U.S. government has taken. Right now, thanks largely to the retirement of coal-fired electricity plants, the country is on track to reduce its carbon emissions by about thirty per cent by 2030, compared to 2005. By providing about $370 billion in tax credits over ten years for solar and wind producers, as well as for the purchase of electric vehicles, the new bill will increase the emissions reduction to about forty per cent, according to several expert analyses. The House gave final congressional approval on Friday to a spending bill which would attempt to tackle climate change, the high cost of prescription drugs and lower the deficit by roughly $300 billion. It was passed without any Republican support and now goes to President Biden for his signature.
July’s 0% inflation and last week’s booming jobs report underscore the kind of economy we’re building – an economy that works for everyone.
– President Biden @POTUS on Twitter
Well. Technically there was month-over-month deflation in July (going from 9.1% in June to 8.5% in July). Also, this has happened before: March 8.5%, April 8.3%.
The July number means that year-over-year, consumer prices are still up a whopping 8.5%, and the Federal Reserve Bank still has its work cut out. It’s a long way down to the 2% long-term target for inflation.
June’s inflation came in at 9.1%.
It seems that the Fed will definitely raise the Federal Reserve rate another 75 basis points at the end of July, and it could very well be 100 basis points (1.0%).
The Gross Domestic Product (GDP) number for the second quarter will come out just the day after the interest rate hike.
GDP growth in Q1 was -1.6%.
Goldman Sachs now says the GDP growth number for Q2 will come in at 0.7%.
The Atlanta Fed is way more pessimistic: its latest forecast for Q2 GDP growth is -1.2%.
A negative Q2 number would mean we are in a recession: two consecutive quarters of negative GDP growth.
It seems we need to have our recession sooner rather than later, so that inflation can be tamed.
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said.
“Gradually, then suddenly.”
-from Ernest Hemingway’s novel The Sun Also Rises (1926)
A headline in the Wall Street Journal says ‘The Crypto Party Is Over’.
It certainly seems to be.
As of Saturday night (cryptocurrencies trade 24/7), Bitcoin was at $18,450, down 30% for the week, and some 72% down from its $68,789 all-time high in Nov. 2021.
(Still up 7-fold from 5 years ago, though).
It was a bad weeks for stocks, but a worse one for all things crypto.
I see a melting Bitcoin ice sculpture and a Shiba Inu doggie, mascot of Dogecoin, in the WSJ picture.
As for the guy on the unicorn floatie in the pool— in business, unicorn has come to be the moniker given to a privately held startup company valued at over US$1 billion.
The press is full of bear market reports with the recent declines in the stock market indices.
Wed 6/15, 2.00 pm EDT: Fed Chairman Jerome Powell announced that the Federal Reserve will indeed raise the federal funds rate by 75 basis points (0.75%), bringing it to the range 1.5%- 1.75%. Right now they project a rate of about 3.5% by year-end.
Welp. Year-over-year inflation for May was 8.6%, up a smidge from March (8.5%) and April (8.3%).
So while the headlines again screamed ‘Inflation soars to 40-year high’ today, it’s been there for three months running now.
The Federal Reserve Board is widely expected to raise the fed funds rate by a half point next Wednesday, but some economists say it should be 0.75% or even 1.00%. I agree with 0.75% or 1.00% —but what do I know?
It was another rough week for the US stock market.
This was the eighth-straight weekly loss for the Dow Jones Industrial Index (-2.8%), its longest weekly losing streak since 1923.
The S&P 500 Index briefly dipped below 20% from its record high in January.
Year-over-year inflation for April was 8.3%, a slight dip from the March figure of 8.5%. The stock market is not happy🤬, of course— and Bitcoin is now below $29k, down more than 50% from its Nov. ’21 high.
At the recent Berkshire Hathaway annual meeting, Warren Buffet reiterated his disdain for cryptocurrencies, saying he would not buy all the cryptocurrency in the world for $25. (I would 😊). I suspect he picked $25 because he then said if someone offered him a 1% stake in all the farmland in the country, he’d immediately write the check for $25 billion. (Got me. I cannot do that even if I wanted to).
His point was that cryptocurrency has no intrinsic, underlying value, and cannot be used as a real-world asset to produce income.
‘Without price stability, the economy does not work for anybody, really’
– Fed Chair Jerome Powell at the Federal Reserve’s news conference yesterday
Wow. We ride the rollercoaster. Up yesterday, the stock market sold off in a big way again today (Dow -3.1%, S&P 500 -4.6%, Nasdaq -5.0%).
Inflation is still very high, and the Fed is finally raising interest rates.
(The Fed funds rate is now 0.75-1.00% after yesterday’s 0.5% raise).
A range of 2-3% is considered neutral, and time will tell if the Fed will have to go above that to bring inflation down to 2%.
Inflation rose to 7.9% in February, the highest rate since 1982. It is still well below the peak of 14.6% in 1980. The Federal Reserve Board raised its benchmark interest rate by 0.25%, and will almost certainly raise it several more times this year, to bring inflation under control.
Jeanna Smialek writes in the New York Times of what happened in the early ’80s: Mr. Volcker’s Fed rolled out policies that pushed a key short-term interest rate to nearly 20 percent and sent unemployment soaring to nearly 11 percent in 1981. Car dealers mailed the Fed keys from unsold vehicles, builders sent two-by-fours from unbuilt houses and farmers drove tractors around the Fed building in Washington in protest. But the approach worked, killing off the rapid price inflation that had festered throughout the 1970s.
Expensive gas is in the news again.
I walked by three gas stations tonight and did a mini-survey.
It turned out that my average for just these three is spot-on for the city’s average.
Seattle is about a dollar a gallon above the national average, but a dollar or more below California’s prices.
(The New York Times: California’s high fuel prices are partly because of taxes as well as regulatory programs aimed at reducing greenhouse gas emissions. Together, they added about $1.27 to the cost of a gallon of gas last month, according to a calculation by the Western States Petroleum Association.)
‘Cash is king’
– Origin unknown, but the saying gained popularity after Pehr G. Gyllenhammar, CEO of Volvo, used it after the global stock market suddenly crashed in Oct. 1987.
I was in the QFC grocery store at Harvard Market on Saturday, and about to put in my credit card to pay for my items at the self check-out.
‘Attention, customers!’ came an announcement. ‘For the next 20 minutes, no credit card, no Apply Pay, no Google Pay can be used; it will be cash only’.
The in-store transaction server must have keeled over or frozen up; maybe it had to be rebooted.
Lucky for me I had cash in my wallet, to let loose— and vamoose.
The Consumer Price Index climbed by 6.8 percent in the past year through November, the data showed, the fastest in almost 40 years.
The headline below says inflation is pressuring Washington (President Biden and the Democrats, I presume).
It’s up to the Federal Reserve Bank and chairman Jay Powell, to decide when to raise interest rates to curb inflation, though.
Hertz said on Monday that it would convert more than 20 percent of its rental fleet to Tesla’s electric cars by the end of next year, an announcement that helped propel Tesla’s stock value beyond $1 trillion for the first time.
Tesla’s stock closed at $1024.86, up more than 12% on the day and giving the company a market value of $1.03 trillion.
The Wall Street Journal notes that the market caps of the biggest nine automakers need to be added to get to Tesla’s market cap.
Yes, Tesla sells 1/10th the number of cars that Volkswagen does, but it will deliver double the cars this year, compared to what it had delivered in 2020. And the stock market bulls argue that Tesla is technically not a car company: it’s a technology company.
The annual inflation rate for the United States was 5.0% for the 12 months ended May 2021, up from 4.2% for April, according to U.S. Labor Department data published on June 10.
Will the Federal Reserve Bank have to raise interest rates from zero much sooner than it had expected just a few months ago?
‘Based on central bankers’ fresh projections released Wednesday, the median Fed official expected to achieve the central bank’s goals and lift rates by late 2023. The Fed’s interest rate projections showed that more than half of its 18 officials expected rate increases by the end of that year. More, but not quite half, expected an increase or two in 2022.
That markup came as Fed officials offered headier economic forecasts. They now see growth coming in stronger in 2021, and expect inflation to average 3.4 percent in the final three months of the year. They expect that headline inflation gauge to retreat quickly, however, falling to 2.1 percent next year and 2.2 percent in 2023′.
– Jeanna Smialek reporting for the New York Times