{"id":119564,"date":"2025-03-08T07:54:28","date_gmt":"2025-03-08T07:54:28","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/real-estate\/paper-economy-reflecting-on-rates\/"},"modified":"2025-03-08T07:54:28","modified_gmt":"2025-03-08T07:54:28","slug":"paper-economy-reflecting-on-rates","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=119564","title":{"rendered":"Paper Economy: Reflecting on Rates"},"content":{"rendered":"


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For the last few months now, I have been suggesting that the Fed needs to move the Fed Funds rate up much faster than they have been, arguing that they are not only \u201cbehind the curve\u201d given their failed \u201ctransitory\u201d position, but that they have totally lost the narrative as far as taking a \u201chawkish\u201d stance is concerned.\u00a0\u00a0<\/p>\n

My suggested approach to rate hikes has been for the Fed to move in the range of +100 to +125 basis points at each scheduled meeting (of 2022) as well as implementing random \u201cemergency\u201d intra-meeting rate hikes and setting an overall target of at least 8.5% by as soon as conceivably possible.<\/p>\n

Obviously, this may seem a bit extreme from the standpoint of the \u201crecency bias\u201d of our current distorted economic times as well as the current level of debt carried widely by households, firms and the Federal government, but historically, this approach is actually very modest.<\/p>\n

The following chart displays the annual rate of change of the consumer price index (i.e. the inflation rate) (in blue), the 30-year fixed mortgage rate (in red) and the effective Federal Funds rate (green) as well as the upper-range target of the Fed funds rate (in light green) in order to present the Fed\u2019s actual current target.<\/p>\n