Fed hikes interest rates by 0.75 percentage point for second consecutive time

Objective: fight inflation

The Federal Reserve on Wednesday enacted its second consecutive 0.75 percentage point interest rate increase as it seeks to tamp down runaway inflation without creating a recession.

In taking the benchmark overnight borrowing rate up to a range of 2.25%-2.5%, the moves in June and July represent the most stringent consecutive action since the Fed began using the overnight funds rate as the principal tool of monetary policy in the early 1990s.

While the fed funds rate most directly impacts what banks charge each other for short-term loans, it feeds into a multitude of consumer products such as adjustable mortgages, auto loans and credit cards. The increase takes the funds rate to its highest level since December 2018.


Former central banker wants Fed to ‘inflict more losses’ on stock-market investors to tame inflation

Historically tight labor market

William Dudley, the former president of the powerful New York Fed, thinks that his former colleagues won’t get a handle on inflation that’s running at around a 40-year high unless they make investors suffer.

There are myriad uncertainties the Fed must navigate, he acknowledged, including the effect of easing supply-chain disruptions and a historically tight labor market. But the effects of the Fed’s tightening of monetary policy on financial conditions — and the the effect that tightening will have on economic activity — is one of the biggest unknowns, Dudley wrote.

Unlike many other economies, the U.S. doesn’t respond directly to changes in short-term interest rates, Dudley said, partly because most U.S. home buyers have long-term, fixed-rate mortgages. But many U.S. households, also in contrast to other countries, have a significant amount of their wealth in equities, which makes them sensitive to financial conditions.


Global finance and economy


Crisis essay 

The causes of financial crisis. It is known that economical development has no constant speed; it must have ups and downs. In my opinion the global knowledge about economics allowed postponing the inescapable downturn. It seemed that modern financial system is able to prevent recession. James Rock, economist … “The world economy cannot grow beyond the limits of its real production, and feeding it by debt and liquidity may only provoke severe corrections”. (George, 2009) …

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Speaking on “New Challenges for Thailand in the New Era of Global Trade and Investment” in Bangkok yesterday, Unctad secretary-general Supachai Panitchpakdi said the global economy is expected to see another slowdown next year, with an expansion of … His comments came after Virabongsa Ramangkura, the newly appointed chairman of the central bank's board and a former finance minister, called for a change in monetary policy with a view to boosting economic growth.
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Eurozone output was down 0.7% in Q2 and even the German economy is limping along at 1.1% growth, while France's output was down 0.2% and unemployment is over 10%–and that's before you get to the deeply recessed/depressed Club Med nations. In Asia … But if an investor calmly tuned out the talking head noise, he would realize that a contrarian, brass kahoonas approach to risk-on, risk-off investments since the global financial crisis in 2008 could have been very profitable.
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“We won't see the the pre-GFC (global financial crisis) credit growth return anytime in the future,” he said, adding that the credit environment mirrored the pressures in the broader economy. Deutsche Bank analyst James Freeman said the ANZ …
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Mish's financial blog covers global news and macroeconomic events regarding the world economy. The blog's primary focus is inflation, deflation, and hyperinflation topics, especially currencies, gold, silver, crude, oil, energy and precious …
http://globaleconomicanalysis.blogspot.com/ — Fri, 17 Aug 2012 18:49:00 -0700


An actress who spoke at the assembly described how she can no longer take acting work because if she does, all her income goes to finance her student debt. … It's been obvious for some time that global counterinsurgency has morphed into a drone-enabled assassination program, a kind of automatic merger of COINTELPRO (the FBI's covert Counter Intelligence Programme from 1956 to 1971) … The global economic hegemony of the US has benefited from the Eurozone disaster.
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