The precondition for knowing when the Federal Reserve stops raising rates

[Wind_FURY]

High unemployment. I'm talking about high unemployment in the United States, and a recession there has always caused a contagion across the world.

It's not merely an opinion that the reason why Jerome Powell can't stop raising rates because of "sticky inflation", and "sticky inflation" will only go down if consumer demand goes down. But how does it go down? It will only go down if people lose their jobs, symptom of a recession. BUT unemployment is still very low, which means Jerome Powell will keep raising rates until there isn't enough money in circulation for companies to pay the wage-earners their salaries.

Teal = Fed Funds Rate, Orange = CPI, Blue = Unemployment Level.

Observe that after the Federal Reserve's rate hikes, high unemployment peak followed a year at least later. It happened during Volker's time during 1983 and Bernake's time during 2009/2010. Powell's time is coming, let's observe what happens for the rest of 2023.

[royalfestus]

High unemployment. I'm talking about high unemployment in the United States, and a recession there has always caused a contagion across the world.

It's not merely an opinion that the reason why Jerome Powell can't stop raising rates because of "sticky inflation", and "sticky inflation" will only go down if consumer demand goes down. But how does it go down? It will only go down if people lose their jobs, symptom of a recession. BUT unemployment is still very low, which means Jerome Powell will keep raising rates until there isn't enough money in circulation for companies to pay the wage-earners their salaries.

High unemployment in the United States is a complex issue with various factors affecting it. It cannot be solely attributed to Jerome Powell's decision to raise interest rates. The Federal Reserve's monetary policy decisions are based on a wide range of economic indicators, including employment levels, inflation, and economic growth, and the primary goal is to promote maximum employment and stable prices.

[be.open]

High unemployment. I'm talking about high unemployment in the United States, and a recession there has always caused a contagion across the world.

It's not merely an opinion that the reason why Jerome Powell can't stop raising rates because of "sticky inflation", and "sticky inflation" will only go down if consumer demand goes down. But how does it go down? It will only go down if people lose their jobs, symptom of a recession. BUT unemployment is still very low, which means Jerome Powell will keep raising rates until there isn't enough money in circulation for companies to pay the wage-earners their salaries.

The unemployment rate is not a condition, but rather one of the indicators. It is difficult to be effective in the fight against inflation with a low level of unemployment, because, experiencing a shortage of free personnel, enterprises are forced to fight for them by raising wages, and this, in turn, continues to spin the flywheel of inflationary expectations. So yes, you're right - as long as US unemployment remains low, you can continue to expect interest rates to rise or stay the same until enough businesses fail or go through massive layoffs.

[EarnOnVictor]

High unemployment. I'm talking about high unemployment in the United States, and a recession there has always caused a contagion across the world.

It's not merely an opinion that the reason why Jerome Powell can't stop raising rates because of "sticky inflation", and "sticky inflation" will only go down if consumer demand goes down. But how does it go down? It will only go down if people lose their jobs, symptom of a recession. BUT unemployment is still very low, which means Jerome Powell will keep raising rates until there isn't enough money in circulation for companies to pay the wage-earners their salaries.

You are getting the whole point wrong. If you are using the unemployment status of the US for the reason why the FED is hiking the rate and using job cuts as a solution to high demands, then you are contracting yourself as this is still leading to more unemployment aside from the fact that it's not the solution.

The reason why FED has been hiking Federal Funds Rate since late 2021 and become so aggressive since 2022 is nothing but a rise in inflation. Inflation should naturally cut demands because you now have lesser value for your money as against your narration. However, what causes inflation might be deeper than anyone could imagine, but of course, this present one is global, so it's a chain reaction that is not peculiar to the US.

The solution to this, and of course what will stop the rate hike and perhaps start forcing FED to cut rates is when the Consumer Price Index, Producer Price Index and Core PCE Price take the downturn. This is when the retail sales and Core Retail sales start to increase, then FED can begin cutting the rate or holding it.

[Wind_FURY]

High unemployment. I'm talking about high unemployment in the United States, and a recession there has always caused a contagion across the world.

It's not merely an opinion that the reason why Jerome Powell can't stop raising rates because of "sticky inflation", and "sticky inflation" will only go down if consumer demand goes down. But how does it go down? It will only go down if people lose their jobs, symptom of a recession. BUT unemployment is still very low, which means Jerome Powell will keep raising rates until there isn't enough money in circulation for companies to pay the wage-earners their salaries.

The unemployment rate is not a condition, but rather one of the indicators. It is difficult to be effective in the fight against inflation with a low level of unemployment, because, experiencing a shortage of free personnel, enterprises are forced to fight for them by raising wages, and this, in turn, continues to spin the flywheel of inflationary expectations. So yes, you're right - as long as US unemployment remains low, you can continue to expect interest rates to rise or stay the same until enough businesses fail or go through massive layoffs.

But it's the primary indicator, and it's actually common sense, and it's the reason why the Federal Reserve is tightening the money supply. The other two posters don't get it, but I'm very confident they will when everything starts to unwind.

The Federal Reserve won't say it out loud in public, but what do rate hikes' actually do? Kill demand and it cannot be achieved without a high unemployment rate.

Check these charts. Teal = Fed Funds Rate, Orange = CPI, Blue = Unemployment Level.

Observe that after the Federal Reserve's rate hikes, high unemployment peak followed a year at least later. It happened during Volker's time during 1983 and Bernake's time during 2009/2010. Powell's time is coming, let's observe what happens for the rest of 2023.

[Sayeds56]

The unemployment rate is not a condition, but rather one of the indicators. It is difficult to be effective in the fight against inflation with a low level of unemployment, because, experiencing a shortage of free personnel, enterprises are forced to fight for them by raising wages, and this, in turn, continues to spin the flywheel of inflationary expectations. So yes, you're right - as long as US unemployment remains low, you can continue to expect interest rates to rise or stay the same until enough businesses fail or go through massive layoffs.

You are correct that unemployment rate is an indicator which reflects the overall health of economy, however, lower unemployment rate rate can directly impact inflation as it can create upwards pressure on wages as employers complete for a smaller pools of available workers.

Inflation is a complex economic phenomenon, that can be influenced by many factors, but I think oil price play main role in its escalation. therefore, if oil prices were start to falling significantly, it could potentially ease inflationary pressure and lead to a pause in interest rates increase.

[Wind_FURY]

The unemployment rate is not a condition, but rather one of the indicators. It is difficult to be effective in the fight against inflation with a low level of unemployment, because, experiencing a shortage of free personnel, enterprises are forced to fight for them by raising wages, and this, in turn, continues to spin the flywheel of inflationary expectations. So yes, you're right - as long as US unemployment remains low, you can continue to expect interest rates to rise or stay the same until enough businesses fail or go through massive layoffs.

You are correct that unemployment rate is an indicator which reflects the overall health of economy, how lower unemployment rate rate can directly impact inflation as it can create upwards pressure on wages as employers complete for a smaller pools of available workers.

Someone has been learning! You're just one of the very few in the forum who truly got the concept. The majority of people have been gaslighted by the misinformation and gaslighting being spread in the media.

Inflation is a complex economic phenomenon, that can be influenced by many factors, but I think oil price play main role in its escalation. therefore, if oil prices were start to falling significantly, it could potentially ease inflationary pressure and lead to a pause in interest rates increase.

It's a MONETARY phenomenon. The "supply side inflation" narrative doesn't explain why inflation is sticky. Simple good sense will tell us that if there's too much money in circulation = more demand.

[slapper]

Jerome Powell is criticized for lowering inflation and rising interest rates. Crazy speed! The Fed? Only a piece of the economic puzzle. Numerous factors affect consumer hunger and price hikes.

However, record-high unemployment and a recession pose serious risks. Instead of raising interest rates, we should consider other economic stimulants.

It comes down to balancing wage-earners, investors, and policy-minded experts.

[Gyfts]

The Federal Reserve won't say it out loud in public, but what do rate hikes' actually do? Kill demand and it cannot be achieved without a high unemployment rate.

Precisely. High interest rates will result in lower economic growth, and lower economic growth will result in high unemployment which then will affect inflation rates. Recession being the proximal factor to high unemployment, of course.

Inflation becomes a positive feedback loop -- with employees demanding more pay, more demand gets created and inflation goes up even higher. Companies just combat it by laying off the employees. Powell gets a bad rep, to be honest. He's trying to play a balancing game with the interest rates based on the dumpster fire he's been handed that is the U.S. economy.

[Flexystar]

I think unemployment is just one of the factor from many which is either indirect symptom of inflation. Unemployment will only reduce the burden from industrialist shoulders to minimise the investment done on cost to company. This indirectly increases the revenue and profitability so that they could pay higher taxes. That’s how whole thing works in corporate sector.

However this is just one factor we are discussing here. It does not fully contribute to the enigma. From small business owner to farmer or from car dealer to manufacturer everything pushes the market demand up and down resulting into adjusted economic cycle and inflation fluctuates accordingly.

Right now demand is disturbed due to hiked interest rates and its not other way round tbh.

[Cryptomultiplier]

In my opinion, the awareness level of cryptocurrency users in the US, may yet be one contributory factor to why consumer demand hasn't dropped significantly, despite the unemployment and hike in interest rates, lately.
The Fed would raise interest still until the crypto world would be met with more market volatility than before.
This can lead to some shit coins crashing too.

It is better to invest in cryptocurrency than spend CBDC.

[Wind_FURY]

I think unemployment is just one of the factor from many which is either indirect symptom of inflation. Unemployment will only reduce the burden from industrialist shoulders to minimise the investment done on cost to company. This indirectly increases the revenue and profitability so that they could pay higher taxes. That’s how whole thing works in corporate sector.

However this is just one factor we are discussing here. It does not fully contribute to the enigma. From small business owner to farmer or from car dealer to manufacturer everything pushes the market demand up and down resulting into adjusted economic cycle and inflation fluctuates accordingly.

Right now demand is disturbed due to hiked interest rates and its not other way round tbh.

But it's the most important, highest one that has a direct impact on demand, and therefore has the most direct impact on inflation.

I don't want to make any predictions/forecasts, BUT I believe the Federal Reserve will only start cutting rates aggressively IF the unemployment rate starts surging, causing a recession.

[Husires]

I hope to add the source and modify the images so that we can follow them with you. Reading the topic now is almost impossible.
I don't know where you got the data that the unemployment rate is so high, but I will use this source as a reference for the discussion.

Source: https://tradingeconomics.com/united-states/unemployment-rate

It is true that the rate of 3.4% is a little high, but it is much lower than the rates for the year 2022, when inflation was high, which means that the Federal Reserve’s policy of raising interest rates, which started from the same period, had a positive effect on reducing the number of unemployment.

I agree that the data still needs more months to judge its accuracy, but it is good compared to the state of the economy.

[Wind_FURY]

I hope to add the source and modify the images so that we can follow them with you. Reading the topic now is almost impossible.

I don't know where you got the data that the unemployment rate is so high, but I will use this source as a reference for the discussion.

It's actually VERY low. The data is from the Bureau of Labor Statistics.

Source: https://tradingeconomics.com/united-states/unemployment-rate

It is true that the rate of 3.4% is a little high, but it is much lower than the rates for the year 2022, when inflation was high, which means that the Federal Reserve’s policy of raising interest rates, which started from the same period, had a positive effect on reducing the number of unemployment.

I agree that the data still needs more months to judge its accuracy, but it is good compared to the state of the economy.

And for some context, Low Unemployment data = High Demand, High Demand = High Inflation, High Inflation = Federal Reserve needs rate hikes to lower inflation, which needs lower demand, which also needs HIGH unemployment - a recession.

They wouldn't tell you that, but that needs to happen and it has always happened a majority of the time when the economy has "over-heated".

The Federal Reserve might start to pivot when they recognize that Unemployment is starting to surge.

[Wind_FURY]

Bump.

This is the schedule of the Federal Reserve's monthly CPI reading until the end of the year.



This month's reading will be an important one because the Federal Reserve "paused" rate hikes last month, and because of that pause, some analysts are projecting that there's a higher probability that inflation might start to go up again. The "reinflation" narrative.

Moreover, unemployment numbers are still very low, which means that demand is still high, which also means that inflation might not go down to the Federal Reserve's target of 2%. I believe they might make the most undesirable decision = higher and longer rate hikes. Perhaps going back to +50 BPS by September.

[Hamza2424]

High unemployment in the United States is a complex issue with various factors affecting it. It cannot be solely attributed to Jerome Powell's decision to raise interest rates. The Federal Reserve's monetary policy decisions are based on a wide range of economic indicators, including employment levels, inflation, and economic growth, and the primary goal is to promote maximum employment and stable prices.

Hmm, I am curious how you will take the freelancers are they falling under the category of unemployment? Because as you know we can never have exact data, still as now digital skills and working from home is more preferred, so how will we consider that type of income in the figures? I am not much familiar with the US monetary policy but I will say one thing my teacher use to say the control of the monetary policy should be independent of the Democratic government. The flow of the money should be prefixed and the factors relevant to it this the only solution for properly economically growing country.

[so98nn]

What does it mean by Feds are stopping the rate hikes and inflation going up? What is the deadline for this one. I mean if FED keep stressing the high rates and keep doing it infinitely then how a common man is supposed to tackle the situation of buying basic needs? Sometimes I don’t get the way fed is trying to control the inflation. The system itself is tricky. All I hear is fed is printing more money out of thin air, they are hiking the interest rates, unemployment is going brrr and what not. Everything seems to be orthodox methods. They always go 360 no matter what. The problem is worst when their decision starts affecting the countries across globe. The whole dollar as reserve currency makes it worst for the others.

[jacafbiz]

I don't think Powell wishes to break things to bring the inflation down, with him not getting the desired results this present a big dilemma for both the FED and the Government, it is not a good sign knowing fully well that the election is coming, if the economy is not doing well what are they going to use to campaign, but the job of the FED is to make sure they have the monetary system under full control. I have a feeling they are going to raise the interest rate by 0.25%, the last time I checked there is 85% chance of this happening before the next quarter and with rumour of Ukraine-Russia war coming to an end we are likely to inflation coming down and likely doge recession

[BitcoinTurk]

Inflation although not completely under control has become substantially controllable but a clear pause signal has yet to be seen for interest rate hikes. I don't think that interest rate hikes will be stopped for a few more months especially since there is an expectation of an increase in interest rates until the end of the year.

If we need to comment on unemployment, when we check today's data we see that there is no environment that can cause a crisis in the unemployment rate. In addition, if we examine the non-farm employment data which is announced regularly every month, we see that the unemployment meets expectations.

[darkangel11]

I don't think Powell wishes to break things to bring the inflation down, with him not getting the desired results this present a big dilemma for both the FED and the Government,

He's not going to get his results because they've been printing to help Ukraine while rising rates. They're lying to us by telling us that covid impacted the economy and the inflation is transitory. It's not transitory and its real reason is money printing. They were printing in 2020, 2021, and in 2022 when they knew there's a problem with inflation. They tried to increase rates but you can't stop inflation when you're adding to the existing supply, when increase in supply is the main cause of inflation.

They're pressing the gas pedal in a moving car while at the same time gently applying breaks and wondering why it isn't stopping.