Over the last week we have seen a huge ramp up with the cut jumping from 25 basis points to 50 basis points. In line with market expectations that was announced minutes ago. HOWEVER, the kicker is the Fed has waved its white flag on the joke that was the 2% inflation goal.
Why do I say this? Because in this announcement they made one comment that only shows that 3% is the new 2%
The committee expects the long-run neutral rate to be around 2.9%, a level that has drifted higher as the Fed has struggled to get inflation down to 2%.
Along with other comments like
Moreover, the Fed chose to cut even though most gauges indicate inflation well ahead of the central bank’s 2% target. The Fed’s preferred measure shows inflation running around 2.5%, well below its peak but still higher than policymakers would like.
Changes in tone here while they sound good show that the Fed is already thinking of when to tell us it is now 3% instead of the 2% Powell was hell-bent on getting us to. They even lowered their predicted inflation for the year in this meeting as well to 2.6% for core EVEN THOUGH THE DATA SAY NO.
Hoenstly... jail jail for all of them.
reply
64 sats \ 1 reply \ @Fabs 18 Sep
Hot damn! @siggy47 the wiggie came in hot with that one!
reply
I want to say @siggy47 and I have talked about this before and how on Capitol Hill it seems to have been an unspoken but accepted thing!
reply
Sayonara mortgage payments. It was nice knowing you.
reply
Can you elaborate on this?
reply
Inflation reduces the real value of fiat denominated debts. I've got a big ass mortgage that's about to evaporate.
reply
50 sats \ 2 replies \ @gmd 18 Sep
Just curious in practical terms how much would you expect to save from a 50 bps cut over the life of your mortgage?
reply
I don't know. It's not an adjustable rate mortgage, so the savings will be entirely through inflation. Let's say we have 3.5% inflation going forward. That would be more than a 10% reduction in the real value of the mortgage, every three years.
reply
21 sats \ 0 replies \ @gmd 18 Sep
ahhh gotcha makes sense
reply
Ah, that's what you mean. Well, they can evaporate only if there is a hyperinflation, couple of % won't do anything. You will only start noticing it in 5 years or more.
reply
Sure, but it's a 30 year mortgage, so it'll still be there in five years. Plus, we might be in a new inflation paradigm. The last four years had almost 30% cumulative inflation.
reply
No, long term you are absolutely right, just thought you are maybe saying your goodbyes too soon:) I had a mortgage in a country with 15% YoY official inflation and I think 30-40% YoY unofficial inflation. The problem is you don't get salary increase every year. So I really started feeling the difference on the 5th year or so, when salary finally caught up.
reply
just thought you are maybe saying your goodbyes too soon
I'm definitely jumping the gun, but that's reasonable because my time preference is incredibly low.
reply
39 sats \ 1 reply \ @Catcher 18 Sep
In this case you should have said your goodbyes the moment you took the mortgage 😂
Is your mortgage interest rate fixed for 30 years?
2% is soo 2020. 2.9% is soo 2024. 3.9% is sooo 2028. N.9% is soo xxxx.
We could have reached N%, if it weren't for these pesky bitcoiners and that pup.
reply
11 sats \ 0 replies \ @Fabs 18 Sep
Well, time to hold onto those sats even tighter.
reply
I was thinking of you as I watch the S&P bounce around. A lot of people see this as a political move to help Harris, but I know you think this will tank markets when the dust clears, right? Fed showing panic?
reply
The amount of jawboning I saw is crazy. The real people getting hurt by this are those on fixed income, the elderly and the financially illiterate. Those getting awarded are those who hold assets, take on debt & outsized risk.
reply
Of course...
reply
money priests gonna phophete away any meaning to the 2% rule 🫠
reply
So what do you recommend? Hold my sats?
reply