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Annual US inflation falls to 3-year low, clearing the way for the Fed to begin cutting rates (apnews.com)

submitted 3 months ago by MicroWave to c/economics

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Year-over-year inflation reached its lowest level in more than three years in July, the latest sign that the worst price spike in four decades is fading and setting up the Federal Reserve for an interest rate cut in September.

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[–] [email protected] 8 points 3 months ago (2 children)

Rates need to tick up a bit higher even.

[–] [email protected] 6 points 3 months ago (2 children)

Then how do hedge funds get the free money to gamble with since apparently that's what the world economy is built on.

[–] [email protected] 2 points 3 months ago

They still can borrow, but they need to actually do some level of due diligence that what they throw money at can actually succeed.

[–] yggstyle 1 points 3 months ago

They abuse the market mechanics. Same as banks. This is why the carry trade is so levered up. Our borrowing rate here is far higher than in Japan so they are backing Japanese borrowing with US assets for additional leverage and then loaning to us investors against that capital. It's a clusterfuck.

[–] yes_this_time 1 points 3 months ago* (last edited 3 months ago) (2 children)

The economy is important. Rates will go lower to protect that.

Central banks I think need to consider a higher neutral rate. Interest rates were too low for too long to try and move GDP growth. In retrospect not a great policy, as it led to a decade or so of inflation in stocks markets and housing.

Why do anything of value if I can just leverage at low rates and dump borrowed money into stocks and real estate?

Central banks tend to be arms reach from government, but maybe they should be doing less and the government more.

GDP growth low? Invest in infrastructure and research. High inflation? Increase taxes.

[–] [email protected] 3 points 3 months ago (1 children)

The economy is doing ok though, inflation is still up. Wallstreet wants lower rates, but listening to them got us extended 0% that ultimately was bad for the economy.

Interest rates going up and forcing over leveraged companies into bankruptcy is also good for the economy.

[–] yes_this_time 1 points 3 months ago

Maybe tough to get a concensus on where the economy is going to be, a bit of reading tea leaves.

Regardless, agreed on extended 0% being problematic. Out of all the factors dragging us down:

interest rate history, pandemic, demographic shifts, climate change, global instability...

It could be interest rates that are having the largest impact today. Considering it caused such a large wealth transfer, equity inflation, and a drag on productivity.

[–] [email protected] 1 points 3 months ago

The whole point of the government not doing anything is that only the central bank can solve inflation through rate hikes.

This ensures further wealth concentration, if the government wasn't lame, more equitable and sane outcomes would be possible.