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Fed raises rates by 0.25% and turns more hawkish
worldtraveller
Posts: 14,013 Forumite
Fed policy makers on Wednesday raised their target range on the central banks benchmark short-term interest rate by a quarter percentage point while also boosting their projections for how much they will raise rates this year and next.
Given what has been happening with the economy, these moves shouldnt have counted as a big surprise. Fed policy makers now have a median projection that inflation will reach their 2% target by year-end. Their year-end forecast for the unemployment rate has shifted to 3.6% from 3.8%.
WSJ
Some would say that at least part of this is also to have some, "meat on the bones" and ammunition, in preparation for the next downturn.
Given what has been happening with the economy, these moves shouldnt have counted as a big surprise. Fed policy makers now have a median projection that inflation will reach their 2% target by year-end. Their year-end forecast for the unemployment rate has shifted to 3.6% from 3.8%.
WSJ
Some would say that at least part of this is also to have some, "meat on the bones" and ammunition, in preparation for the next downturn.
There is a pleasure in the pathless woods, There is a rapture on the lonely shore, There is society, where none intrudes, By the deep sea, and music in its roar: I love not man the less, but Nature more...
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In comparison with the Fed move and more hawkish signals, it's interesting to note that the ECB has today announced that it will shut its hallmark bond purchase scheme (QE) by the end of the year, halving its bond buys to 15 billion Euros a month from October until then.
It also signalled that any interest rate hike is still distant.There is a pleasure in the pathless woods, There is a rapture on the lonely shore, There is society, where none intrudes, By the deep sea, and music in its roar: I love not man the less, but Nature more...0 -
worldtraveller wrote: »In comparison with the Fed move and more hawkish signals, it's interesting to note that the ECB has today announced that it will shut its hallmark bond purchase scheme (QE) by the end of the year, halving its bond buys to 15 billion Euros a month from October until then.
It also signalled that any interest rate hike is still distant.
Well off the curve. The US finished with QE in 2014. The ECB isn't ceasing until December 2018. Don't underestimate the power of the $ on the money markets. Some other countries have already responded to the Fed hike to maintain exchange rate parity.0 -
From BBC's Kamel Ahmed...
IMF managing director @Lagarde "The US economy is doing even better than last year. Growth is stronger, unemployment is near lowest it has been since the 1960s, inflation is contained, and consumer and business confidence are high." Interest rates may have to rise more quickly
Seems Christine Legarde is warning that we may need to follow suit (by we, I mean the EU) unless we want to get left behind.0 -
One wonders how bad the house price crash america is currently undergoing is because you know when interest rates go up houses are going to crash to two ha penny
Google my old pal what say you? 50% HPC 70% HPC?
Nope. Prices up 6.6% on the year
The doom mongers are in for yet another disappointment.
Rates go up to try and cool a boom
They dont go up to crash the housing market and cover a 20 year loss making hpc bet0 -
One wonders how bad the house price crash america is currently undergoing is because you know when interest rates go up houses are going to crash to two ha penny
Google my old pal what say you? 50% HPC 70% HPC?
Nope. Prices up 6.6% on the year
The doom mongers are in for yet another disappointment.
Rates go up to try and cool a boom
They dont go up to crash the housing market and cover a 20 year loss making hpc bet
Key difference being the house price to income ratio in the first place....which is a lot lower in the US as a whole.0 -
Graham_Devon wrote: »Key difference being the house price to income ratio in the first place....which is a lot lower in the US as a whole.
So you are saying that the 10 out of 12 cheaper regions in the UK wont be affected by higher interest rates. Glad we agree0 -
So you are saying that the 10 out of 12 cheaper regions in the UK wont be affected by higher interest rates. Glad we agree
No.
The average house price in the US (across all states) is $188,000. The average salary is $44,500.
That puts the income ratio at 4.2x salary.
Or to put it into our terminology, the equivalent in the UK would be an average house price of around £120k for affordability purposes.
If average house prices were around £120k in the UK currently, interest rate increases wouldn't be as great a deal here, either.
But the average house price is nearly double that at £220k, with the income ratio standing at around 6.5x income.
As I said, big difference. Surprised you can't see the difference in truth.0 -
Graham_Devon wrote: »No.
The average house price in the US (across all states) is $188,000. The average salary is $44,500.
That puts the income ratio at 4.2x salary.
Or to put it into our terminology, the equivalent in the UK would be an average house price of around £120k for affordability purposes.
If average house prices were around £120k in the UK currently, interest rate increases wouldn't be as great a deal here, either.
But the average house price is nearly double that at £220k, with the income ratio standing at around 6.5x income.
As I said, big difference. Surprised you can't see the difference in truth.
The idea that the UK will just truck along if globally interest rates start climbing is one of the funniest things I have heard on here in a while :rotfl: Pretty sure Great Ape is just a wind up account though anyway?0 -
Graham_Devon wrote: »No.
The average house price in the US (across all states) is $188,000. The average salary is $44,500.
That puts the income ratio at 4.2x salary.
Or to put it into our terminology, the equivalent in the UK would be an average house price of around £120k for affordability purposes.
If average house prices were around £120k in the UK currently, interest rate increases wouldn't be as great a deal here, either.
But the average house price is nearly double that at £220k, with the income ratio standing at around 6.5x income.
As I said, big difference. Surprised you can't see the difference in truth.
It's hardly just one national market though, I was shocked at some of the prices I saw in San Francisco when I was over there, made London look cheap, and it is hardly collapsing at this point either.
https://sf.curbed.com/2018/4/5/17201888/san-francisco-median-home-house-price-average-2018
With regards to rates looking at the US economy, we are seeing fiscal loosening in an already strong economy with a tight Labour market, of course the Fed is going to tighten, I only wish the UK economic outlook was quite so rosy.
Yes rates will rise in the UK but not much evidence that it will be particularly rapid process at present0 -
Graham_Devon wrote: »
The average house price in the US (across all states) is $188,000. The average salary is $44,500.
You cannot compare the whole of the USA with the UK.
Alabama Median Home Value: $125,600
Arkansas Median Home Value: $121,000
Indiana Median Home Value: $125,000
Iowa Median Home Value: $130,900
Kansas Median Home Value: $127,600
Kentucky Median Home Value: $136,6000
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