Read the Beforeitsnews.com story here. Advertise at Before It's News here.
Profile image
By Freedom Bunker
Contributor profile | More stories
Story Views
Now:
Last hour:
Last 24 hours:
Total:

Forecasting Interest Rates

% of readers think this story is Fact. Add your two cents.


Last week, I explained why the Federal Reserve (Fed) is unlikely to meet its 2% inflation target in 2024, and I haven’t changed my mind. I referred to an article that said, “Fed Chair Jerome Powell made it clear Tuesday he thinks the Fed will need more than a quarter’s worth of data to really make a judgment on whether inflation is steadily falling towards 2%.”

Based on that, I concluded, “If that is the case, and taking Powell’s statement at face value, interest rate cuts seem unlikely in 2024.”

Should we take Powell’s statement at face value?

I am more confident predicting the inflation rate through the end of the year than I am predicting interest rates. Inflation is the result of millions of people deciding what they want to charge for what they sell and what they are willing to pay for what they buy. Monetary policy is the primary determinant of inflation, but today’s inflation results from past monetary policy. Interest rates are heavily influenced by the decisions of a few people at the Fed.

Economics offers much insight into how people will respond to monetary policy in the recent past. However, it offers only a little insight into Powell and his colleagues at the Fed’s decisions.

If inflation does not meaningfully decline, then, taking Powell’s statement at face value, there will be no interest rate cuts in 2024. However, Fed decisions may have political motivations behind them. If so, in an election year, interest rate cuts could be coming even if inflation remains at (or above) its present level.

Economics does lend some insight into this, noting the possibility of political business cycles. The theory, in brief, is that incumbents are more likely to be reelected when the economy is in an upswing, so they have an incentive to stimulate the economy leading up to an election, even if negative consequences of that stimulus will occur after the election.

That stimulus might occur through fiscal policy. For example, an incumbent might introduce a policy to forgive the debts of a group of debtors, which would have the dual effects of injecting additional spending into the economy and buying the gratitude of those whose debts are forgivenRelated to today’s topic, the stimulus also might occur through monetary policy. The Fed can lower interest rates to provide stimulus, even though that would be counterproductive to its declared goal of lowering inflation.

If I am right that the inflation rate will show no meaningful decrease in 2024, and the Fed does not cut interest rates, then Powell’s statement means what it says. If inflation does not fall and the Fed cuts interest rates, that would be a sign that it is bowing to political pressure from incumbents to provide monetary stimulus to the economy prior to the election.

We can see what the Fed is doing. Intuiting its motives is conjecture. I have previously suggested that Powell’s Fed has been politically astute in its anti-inflation policies. In 2022, Powell and others at the Fed echoed the Biden administration’s line on inflation even though there was good reason to question it.

If my conjecture two years ago was correct, we might expect interest rate cuts leading up to the election, regardless of the inflation numbers.

Last week, I gave an inflation forecast. This week, I am telling you that I cannot forecast short-term interest rates because that is up to the Fed’s discretion, and I can’t read their minds. What I will say is that if my inflation forecast proves accurate and the Fed lowers interest rates prior to the election, there is good reason to think that the Fed’s “get tough on inflation” policy was put on hold for political reasons.

The post Forecasting Interest Rates appeared first on The Beacon.

Read More…


Source: https://freedombunker.com/2024/05/23/forecasting-interest-rates/


Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world. Anyone can join. Anyone can contribute. Anyone can become informed about their world. "United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.


LION'S MANE PRODUCT


Try Our Lion’s Mane WHOLE MIND Nootropic Blend 60 Capsules


Mushrooms are having a moment. One fabulous fungus in particular, lion’s mane, may help improve memory, depression and anxiety symptoms. They are also an excellent source of nutrients that show promise as a therapy for dementia, and other neurodegenerative diseases. If you’re living with anxiety or depression, you may be curious about all the therapy options out there — including the natural ones.Our Lion’s Mane WHOLE MIND Nootropic Blend has been formulated to utilize the potency of Lion’s mane but also include the benefits of four other Highly Beneficial Mushrooms. Synergistically, they work together to Build your health through improving cognitive function and immunity regardless of your age. Our Nootropic not only improves your Cognitive Function and Activates your Immune System, but it benefits growth of Essential Gut Flora, further enhancing your Vitality.



Our Formula includes: Lion’s Mane Mushrooms which Increase Brain Power through nerve growth, lessen anxiety, reduce depression, and improve concentration. Its an excellent adaptogen, promotes sleep and improves immunity. Shiitake Mushrooms which Fight cancer cells and infectious disease, boost the immune system, promotes brain function, and serves as a source of B vitamins. Maitake Mushrooms which regulate blood sugar levels of diabetics, reduce hypertension and boosts the immune system. Reishi Mushrooms which Fight inflammation, liver disease, fatigue, tumor growth and cancer. They Improve skin disorders and soothes digestive problems, stomach ulcers and leaky gut syndrome. Chaga Mushrooms which have anti-aging effects, boost immune function, improve stamina and athletic performance, even act as a natural aphrodisiac, fighting diabetes and improving liver function. Try Our Lion’s Mane WHOLE MIND Nootropic Blend 60 Capsules Today. Be 100% Satisfied or Receive a Full Money Back Guarantee. Order Yours Today by Following This Link.


Report abuse

    Comments

    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    MOST RECENT
    Load more ...

    SignUp

    Login

    Newsletter

    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.