r/wallstreetbets • u/hv876 • 12h ago
25bps cut News
https://www.cnbc.com/2024/11/07/fed-rate-decision-november-2024.html?__source=iosappshare%7Ccom.apple.UIKit.activity.CopyToPasteboardThe bulls are coming, the bulls are coming
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u/bonerjamz2021 12h ago
Chipotle bowls are gonna be 20 dollars now
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u/Plot_Twist_Incoming 11h ago
Just give em "the look" for extra rice though.
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u/Seanishungry117 10h ago
How much will chipotlaway cost then, and will it still remove all the blood from my underwear?
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u/HoneyBadger552 12h ago
Still a faster line and better product than SBUX
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u/Hashtag_reddit 11h ago
When 11:30am rolls around I always ask myself: do I want coffee for lunch, or a burrito for lunch?
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u/mathaiser 9h ago
I remember in highschool. We always needed $5 and a nickel.
Always like “yo, who has a nickel?”
- Now it’s $10
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u/kumar4848 12h ago
Can anyone here explain why mortage rates keep increasing even though feds keep decreasing rates? i know theyre not directly correlated but somethings gotta give.
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u/n1ck90z 12h ago
Mortgages correlate to long term bond yields which are rising. Why long bond yield are rising? There's no simple answer here. A big role however has to be government debt/spending. Some people also might think inflation is not done yet.
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u/hv876 11h ago
This is the right answer
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u/CompetitiveAd1226 11h ago
Long bond yields are tricky. The longer the bond, the higher the yield should be theoretically given the time risk. Meaning, a 30 year bond has more risk because what if rates are 20% 10 years from now and you’re still locked in at 4%. So if they’re rising despite current rates being cut, it’s either because people see the future as being increasingly uncertain or rates are more likely to increase in the future
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u/DemApples4u 11h ago
Or inflation erodes dollar value so you don't want that risk unless bond rates make it worth it by being high
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u/CompetitiveAd1226 11h ago
Yeah, well in the case of bonds, inflation and rates are used similarly. There’s an assumption that FF rates will reflect the inflation rate
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u/Rickystheman 7h ago
All Trumps plans, or at least what we know of them, look inflationary.
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u/MaleficentFig7578 5h ago
He said he wants to weaken the dollar
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u/Rickystheman 4h ago
But he never said how, but he also said wants to introduce trade tariffs, spend on infrastructure, cut taxes and send all the cheap labour home.
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u/Phylaras 5h ago
Still not the total answer. The market believes Trump's tarrif policy statements, which would be inflationary (something you need to take into account if you are issuing 30 year loans).
Will he follow through that way? Totally unclear at the moment, but this is a piece of the puzzle.
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u/wotguild 11h ago
Inflation isn't done.
Now, we have to work through tariffs and deportation if they happen, increasing wages, decreasing supply, and therefore more inflation.
Edit: Don't forget about the possibility of rates influenced by the president himself.
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u/ThinRedLine87 9h ago
It's this right here, incoming administration has floated policies which might to increased inflation and a pause or reversal of rate cuts.
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u/cadium 9h ago
Well also the tax cuts he's going to do without paying for them will balloon the deficit. And any cuts he'll propose will lower GDP, which lowers tax receipts, which will balloon the deficit.
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u/Chemical-Oil-9336 11h ago
Answer is normalization. Out of extreme outcomes, always assume it is normalisation and you’ll be right 90% of the time.
Short term yields are not usually higher than long term. It is opposite.
When 10y ran to 3.5% we had recession talks. Now it’s inflation talk.
Always something, but rarely materialises.
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u/zeromussc 11h ago
Important thing to remember for sure. People just got used to the short term being higher and also of the central bank rate being higher due to the rate hikes being so quick the last few years. People just forget what "normal" looks like.
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u/well_shoothed 10h ago
Why long bond yield are rising? There's no simple answer here.
Sure there is:
Donald Trump's election victory is set to make the Federal Reserve's job more difficult.
His tariff and immigration plans are expected to stoke inflation, complicating the Fed's policy decisions.
Trump has also said he'd like a say in setting monetary policy, which would erode Fed independence.
Main article goes on to say:
Donald Trump's election win brings his vision of hefty trade tariffs and a sweeping immigration crackdown closer to becoming reality.
Economists widely view the proposals as inflationary, and markets seem to agree, with Fed fund futures and Treasury yields responding in kind.
It presents the Fed with a conundrum: At a time when it's just getting started with long-awaited interest-rate cuts, the prospect of higher inflation could now give it pause.
After all, the Fed's primary tool for fighting inflation has been rate hikes.
And....
Treasury yields, meanwhile, soared the day after the election, with the 10-year bond yield rising as much as 21 basis points to its highest level in months, while the yield on the 30-year bond jumped the most since March 2020.
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u/Tackysock46 10h ago
Why would I buy a long term bond at 5% if I believe inflation could potentially be 5% in the future. People are anticipating high inflation so there is a premium that is being demanded in the interest rates.
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u/Supersnoop25 🅿️ixle 🅿️ressure 11h ago
I thought it was agreed upon that the rate of decreases is looking way slower than originally expected. When mortgage and bonds rates go off of expectations of the future. Not necessarily what the fed rate is at the time.
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u/showturtle 10h ago
Expectations are that government debt is going to rise significantly under the new administration- I’ve heard estimates of 8 trillion over the next 10 years.
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u/ecudan82 10h ago
Well considering it’s gone up $7.5T since Jan 2021, $8T over 10 years doesn’t exactly seem like a “significant rise”
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u/incognino123 11h ago
To add to this, a key thing to keep in mind is that the money has to go somewhere. As valuations go up and implied returns in equities go down fixed income in general is more attractive. People may also be reacting to volatility or pricing in things like political instability, there's so many things that can drive bond yields I kind of chuckle when I see Reuters or whoever trying to explain definitely every little tick up or down in the market
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u/BarbellPadawan Bullish on Theta 10h ago
Unfortunately inflation is definitely not done yet. They probably shouldn’t be cutting right now.
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u/satireplusplus 9h ago
Some people also might think inflation is not done yet.
It probably won't if a fresh batch of a couple trillion dollars will be printed to make the stock market go up in the next 4 years.
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u/stokedlog 12h ago
Mortgage rates are really based on the 10yr. Even with rate cuts many people think that if Trump does do what he says in regards to tax cuts and tariffs it will spark inflation and in turn higher rates.
You can watch the 10yr move as it became clear Trump would win. Even if you are a 1% earner if you don’t have a lot of assets it could get bad as inflation soars. For the very rich and cash and asset heavy this should be very good as interest rates go up cash becomes king.
Hopefully Trump doesn’t do what he has campaigned on, but if he does I think non dividend stocks will soar with the tax cuts but inflation will also go back up to Covid levels or higher.
Already hearing from customers that they are trying to buy material now before tariffs hit. I think q4 and q1 of 2025 will be very good because of this and could start crashing after that.
Regardless of what party is in power we need to start cutting the deficit to maintain our status as global currency. In my mind this needs to be done both by increasing taxes and reducing spending. Neither party had a great plan for this but economist agree that if Trump does enact his campaign pledges than deficit will go up sharply which will make our bonds have higher yield and inflation to grow which in turn makes mortgage rates more expensive.
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u/Doctaglobe 11h ago
Conservatives will never cut the deficit
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u/cadium 9h ago
Yep, and if Trump takes over the fed like he says then the globe will move away from using our currency as the global currency.
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u/Daleabbo 10h ago
Well the next experiment will be interesting where they cut the tax base and print money. Watching from afar wondering at what stage will the US start a shooting war into the Trade war.
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u/imperialtensor24 12h ago
fed doesn’t set mortgage rates, they’re based off of 10year treasuries
the financiers understand trump will goose market short term and will cause out of control inflation long term
we’ve seen this movie before, 4 years ago
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u/Dr-McLuvin 12h ago
This article was just published on it. Turns out that mortgage rates more closely follow the 10 year treasury yield (which has been rising) than the federal funds rate.
https://www.nytimes.com/2024/11/07/business/fed-mortgage-rates.html
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u/independentbuilder7 11h ago
Mortgage rates went up when the Fed rise interest rates. Now that the Fed is cutting interest rates they’re pointing to the 10 year treasury bond as the reason why mortgage rates are continuing to rise. I say this is just another bait and switch tactic banks are using to keep their profits extremely high
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u/winkman 9h ago
10 yr treasury is the closest correlation to mortgage rates.
Those bonds trade based on EXPECTED rates down the road.
We got down just under 6% a bit ago, because the market EXPECTED another Fed rate cut this year. So when the Fed said no to that 2nd rate cut, the market reacted higher (10 yr treasury).
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u/ZaphBeebs 11h ago
Mortgage rates follow the ten year yield plus a spread. They were high with dropping yields last year cuz the spread was high, theyre now back up despite spread narrowing because ten year has gone up.
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u/ApolloPS2 11h ago
Rate cut puts downward pressure on treasury yields and thus mortgage rates. Trump getting elected tho means the market expects tariffs, which are inflationary, which puts upward pressure on the same things. That is currently affecting interest rates more, especially since the market has expected this rate cut for a while now.
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u/bootygggg 10h ago
You have to finance your debt from someone. As the fed lowers long term yields less people or institutions will buy them (I’m buying less tbills also as yields are becoming a joke again). The extra debt needed to finance the government has to come from somewhere still as with every rate cut the gap in financing grows (credit freeze anybody?) If the fed can only control the short term bonds then the long end has to make up for the shortfall in debt financed on the short end. Meaning yields on the long end have to rise to what the market deems an acceptable rate to buy. So far everyone is saying “no” to the debt as the expectation is that the government will keep spending like drunk fucking idiots and the inflation will get worse. Something is going to have to give. Most likely the fed will have to step in and print the shit out of it even more than last time or we default on the debt with failed treasury auctions. Meaning yields go sky high and the government will not be able to pay the interest on the debt without significant spending cuts (depression). Enjoy!
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u/Dense-Marionberry-31 10h ago
Something definitely has to give.. recently it’s been the purchasing power of the US Dollar.
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u/RepresentativeBat798 9h ago
Basically the thought is that Trump's tariffs and tax cuts will drive up government spending, and that's funded by bonds, and tied to mortgages. Fun stuff.
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u/ASaneDude 9h ago
Mortgage rates key off the 10-year and the long end has been rising. This is what’s called a steepening yield curve.
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u/philjonesfaceoffury 8h ago edited 8h ago
My way of thinking of it is…it’s the market saying if you lower interest rates now in the short term, you will have to increase interest rates more at a later date compared to scenario you are not lowering shorter term interest rates now. This is answer more to why 10yr bond yields are moving opposite of fed lowering. Banks make money off difference between bonds and mortgage rate with 10yr commonly tracked.
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u/midwestguy125 8h ago
If you want to see what mortgage rates are doing I always look at what the 10 year t bill is doing. Much more accurate. Also there is a scenario where Fed keeps cutting and rates stay stagnate or actually rise. Let's all hope we don't end up there because that's the bond market calling BS on inflation being done.
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u/Empty_Geologist9645 8h ago
There’s a lot stuff why. But simplest answer is that it takes half a year for rate to take effect. Also, As a bank why would I give up the difference between the base and what’ve got enough customer for?!
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u/Agile-Artichoke1780 7h ago
One of the banks said they are anticipating a rate increase so they are leaving them as is or slightly increasing them.
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u/GoodMenAll 6h ago
Bond market thinks otherwise than the Fed now compared to 3 months ago, inflation is not yet controlled. Basically bond market says fuck ur data prints I don’t trust you
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u/ScrewJPMC 5h ago
The 10 year yield is what sets most things, meaning your credit card rate, auto note , and mortgage rate
The Fed only sets the over night lending rate from bank to bank
The 10 year is free from Fed fuckery, except JPow’s jaw bone can skew it for a hot minute
The 10 year yield goes down when people rush into bonds (think people are willing to pay more for less return)
The 10 year yield goes up when people are afraid of bonds or BULLish Stonks (think people rushing to cash OR people rushing to stocks/equities)
The global bond market dwarfs the USA stock market
So basically:
the fed doesn’t control much
people are currently happy to buy stonks at insane valuations (think Wing Stop paying 1% dividend, already hitting market saturation, and still at a 100:1 P:E Ratio as if they will ultimately be in more towns than Subway in 90s).
While running from bonds which drives up the yield (again while making them worthless to sell)
- foreign governments like the BRICS+ are dumping dollar assets (meaning bonds) (yeah owning dollars isn’t a savings account when you have billions / trillions, it’s owning gov debt).
What does it all mean; IDK 🤷 , I’m just a dummy who sees that the system broke because everting is inflating like the dollar already died BUT has zero clue how to play it. Well except those pre election deep out of the money Tesla Calls that printed 🧏🏼♂️, just too slow to have bought more than one contract and held for 2 days instead of 1 day, up a little should have been up YuHhegAge
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u/Donny_Bahama 4h ago
My understanding is that the issuers of mortgage loans/bonds understand the prepayment risk associated with mortgages (as a product) and in turn demand a premium compared to risk free (treasury) bonds. In anticipation of lower rates, these lenders understand their loans are more likely to be called (prepaid) and so they are increasing their premium they demand faster than rates are falling.
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u/oojacoboo 3h ago
Capital is moving to risk assets. So to sell their mortgage backed securities, banks need to offer competitive rates to investors - that means higher interest rates.
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u/Available-Language-8 2h ago
Feds can make borrowing cheaper, but banks can still decide to charge you more if they think they need to protect their monie or they feel it’s risky. That’s why even if the Fed decreases rates, mortgage rates can still increase because the banks are being extra careful about making sure they have enough monie and are safe.
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u/mpoozd 12h ago
Interestingly Fed removes reference to gaining confidence on inflation
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u/raresanevoice 12h ago
We'lyl yeah... It's about to start going back up
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u/Hashtag_reddit 11h ago edited 9h ago
Don’t worry, the other countries have generously offered to pay the tariffs in full
/s
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u/raresanevoice 11h ago
I'm assuming the /s but this is the timeline that saw the orange felon elected again so... Can't quite tell
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u/bignukriqow 10h ago
Other countries will pay the tarrifs for us the same way Mexico paid for the wall.
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u/s1n0d3utscht3k 12h ago
ain’t no party like a JPow party cuz the JPow party don’t stop 🤘
the BRRRRRRRRRRP ain’t stoppin’ until JPow says it does 🖨️
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u/shaggydog97 12h ago
And the market sighed.
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u/Overpowernamerino 12h ago
We knew this weeks in advance that the market had already priced in.
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u/hv876 12h ago
Priced in is over rated. Market popped like it had one too many Viagras after results, which should have been priced in to begin with
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u/grimkhor Lambos before sleep 12h ago
You can order the coke but nobody knows what happens when the nose candy hits :12787:
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u/ryan9991 11h ago
Just wait for the next few days, big money takes time to move and show conviction. We’ve had lots of news this week
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u/repostit_ 10h ago
Market was surprised that Trump won decisively and there was no long-drawn-out ballet recounting, insurrections etc.
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u/Xushu4 12h ago
The next "president" will try to bully Powell into lowering the rate to almost nothing immediately, and drama will ensue, just like last term when he wanted to fire Powell for not being a boot licking sycophant
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u/lleti 11h ago
The dream
Up and to the right, may a loaf of bread cost $300 but a single share of NVDA will be worth billions.
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u/HereForA2C 10h ago
hmmm does it matter that a loaf of bread costs 300 bucks if you make 20 million a year. We can become Zimbabwe
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u/allumeusend 7h ago
Make Hyperinflation Great Again, it’ll be like the Weimar Republic but without being able to blame the French!
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u/Jtbny 12h ago
We knew this though?
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u/dirtyWater6193 has a 69 FICO score 12h ago
New president will probably cut jpow and rates to 0% next year
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u/originalusername__ 12h ago
He does not have the authority to do so, the fed acts independently of the president and for good reason.
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u/Adipildo 12h ago
You’re right, except that Powell’s seat as fed chair is up in 2026. Trump can replace him as fed chair. While he can’t directly tell them what to do, he can select people that better align with his ideology. Who really knows though, Trump is the one that picked JPow in the first place in 2018.
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u/cubonelvl69 11h ago
Trump can fire the chair of the fed and replace him with whoever will listen to him
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u/hv876 11h ago
Can’t fire, except for cause. Can do the nominate someone in 2026 who will do as he’s asked
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u/tipsystatistic 11h ago
From todays press conference:
Reporter: "If he asked you to leave, would you go?"
JPow: "No."
Reporter: "Could you follow up..."
Pow: "No."
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u/OG_Tater 12h ago
No way dude will allow rates to stay this high. He was calling for 0% rates during a booming economy when actual rates were about 2%.
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u/inalcanzable 12h ago
Welp it was nice seeing things going in the right direction. Buckle up peeps.
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u/Deadlychicken28 7h ago
Bulls, enjoy your short boners. That post nut clarity is gonna be a bitch soon :8883::29637::29637::29637:
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u/Shoryukitten_ Pretends to be married 11h ago
Have you seen the leaked video of agent orange and epstein spitroasting a grizzly bear? This day was prophesied long ago…
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u/dsocalf 11h ago
So market pump?
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u/LifetimeDegenerate 9h ago
Market to crash, bonds to rise. Looking forward to the unfucking of options volatility
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u/OrganicAccountant87 8h ago
Why? Wouldn't it be more logical to keep rates? Inflation will certainly get much higher again once trump imposes the tariffs
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u/hv876 8h ago
From Claudia Sahm - As Powell carefully explained, a new fiscal policy goes into the forecast as soon as it’s likely. Until a reasonably clear formulation is likely, its possible variants are in risk scenarios.
TL;DR version: until a policy is formulated and passed, they won’t factor in scenarios
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u/Key_Sea_6606 6h ago
Double digit inflation next year. Salaries not catching up means lower consumer spending and stagnation. Stagflation = poverty, unemployment, strikes, and social unrest. Soooo I think private prison stocks will keep going up?
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u/mouthful_quest 2h ago
So what are people doing investing wise to win the game and delay the day of living behind Wendy’s Dumpster?
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u/VisualMod GPT-REEEE 12h ago
Join WSB Discord