0.4%
Yesterday the Federal Reserve increased overnight interest rates for bank reserves to 0.4%, the highest in two years, after leaving interest rates near zero since March 2020 -- the month when most of us in the US felt like the pandemic began.
They also projected they would increase rates to 1.9% by the end of this year, via six periodic quarter-point increases. This projection matches current futures market expectations.
With inflation currently estimated at 8.4%, overnight interest rates are 8 points underwater, the widest negative difference since at least 1954. Economists generally view negative real interest rates as highly stimulative to the economy.
Well, at least interest rates are on their way up, even if too slowly for my taste. Last night a friend asked me when I think mortgage rates will return to 3% and I said, "Probably not again during our lifetimes." I think history will look upon how the Federal Reserve and US Congress acted during COVID and will see a huge waste of money that stoked a decade-long fight against out-of-control price increases.
They also projected they would increase rates to 1.9% by the end of this year, via six periodic quarter-point increases. This projection matches current futures market expectations.
With inflation currently estimated at 8.4%, overnight interest rates are 8 points underwater, the widest negative difference since at least 1954. Economists generally view negative real interest rates as highly stimulative to the economy.
Well, at least interest rates are on their way up, even if too slowly for my taste. Last night a friend asked me when I think mortgage rates will return to 3% and I said, "Probably not again during our lifetimes." I think history will look upon how the Federal Reserve and US Congress acted during COVID and will see a huge waste of money that stoked a decade-long fight against out-of-control price increases.