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Writer's pictureHowie Klein

Another Rate Hike



Yesterday, the conservatives at the Fed may have pushed the economy another step closer to recession by raising interest rates another quarter-percentage point (to 5.25%), “lifting the benchmark federal-funds rate to a 16-year high as part of its continuing campaign to stamp out inflation. The Fed doesn’t set mortgage rates, but rate increases push up the yield on the Treasury note higher, which in turn pushes up the cost of a mortgage”— bad news for home buyers, home sellers and, for example, furniture makers, painters, moving companies, carpet steamers… Last night, Katy O’Donnell reported that “mortgage rates have more than doubled since the Fed’s first rate hike in March 2022, and the average monthly mortgage payment for a ‘typical’ home has risen 50 percent over that period… The Federal Reserve’s decision Wednesday to raise its key interest rate to the highest level in 17 years could drive mortgage rates, currently at 6.4 percent for a 30-year fixed mortgage, still higher… pricing many would-be buyers out of the market.”


Progressives have been urging the Fed to hit the pause button on the rate hikes, as the job market keeps showing signs of cooling and regional banks… teeter. Elizabeth Warren, Bernie, Sheldon Whitehouse, Pramila Jayapal, Brendan Boyle and Katie Porter sent Powell a lerrer on Monday warning him that in their view the “Fed’s monetary policy strategy of more rate hikes could trigger a recession, throw millions out of work, and crush small businesses.”



In his public remarks, Powell seemed to indicate that this might be the last interest raise. Right after the rate hike was announced Accountable.us released a statement blasting the action “over the dire warnings from a chorus of economists, and lawmakers that higher interest rates will cost millions of Americans their jobs and usher in a deep recession, while doing little to address inflation drivers like corporate profiteering. Government watchdog Accountable.US renewed its calls on the Fed to abandon its strategy that is doing far more harm than good for the economy and American workers…According to the Wall Street Journal: ‘Inflation has proved more stubborn than central banks bargained for when prices started surging two years ago. Now some economists think they know why: Businesses are using a rare opportunity to boost their profit margins. […] Inflation rates also remain uncomfortably high in the U.S. and many other parts of the world despite interest-rate rises that have gone further and been delivered more quickly than at any time since the 1980s. […] [T]here are signs that companies are doing more than covering their costs. According to economists at the ECB, businesses have been padding their profits. That, they said, was a bigger factor in fueling inflation during the second half of last year than rising wages were. […] Last month, Procter & Gamble said it had boosted its profit margins in the first three months of the year, thanks in large part to higher prices.’”



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2 Comments


Guest
May 04, 2023

Mr. Toomey is correct. of biden's many fuckups, reappointing powell will likely prove to be his worst. why?

again, Mr. Toomey: "Powell is doing his dead level best to increase the likelihood that the GOP nominee will prevail next year."


it's already close. After some more banks go poof (and are absorbed by the already TBTF/J, making trusts more powerful) and the economy struggles (say U3 jumps 2 points, meaning the more relevant U6 jumps 5), how many biden voters will be disgusted enough to stay home?... or even vote nazi?


enough to catalyze the reich? I'm thinking prolly.


will the official extended arm salute have the hand lower if desantis is fuhrer (he's short)? good germans... um... I mea…

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ptoomey
May 04, 2023

Powell is a threat to democracy. Each of the 2 GOP presidential candidates who poll above single digits is a threat to democracy. Powell is doing his dead level best to increase the likelihood that the GOP nominee will prevail next year. Not only is Powell's loose regulation/tight money policy morally suspect and economically unsound, it's making it more likely that we get President Trump or President DeSantis.


Of the many missteps of the Biden presidency, re-appointing Powell was 1 of the worst.

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