When rates fall again
The yields are still very low. They don’t keep up with inflation, and if they eventually do, that’s probably not good news either. Even if the Federal Reserve manages to reduce the rate of inflation close to its 2 percent target rate, it will slow the economy, perhaps tipping it into a recession.
If the slowdown is evident, the Fed is likely to start cutting rates, creating an opportunity for nimble money market fund managers to beat inflation by a small amount. While money market fund yields are improving, as an investment they remain a bad idea.
8
29 reads
CURATED FROM
IDEAS CURATED BY
The idea is part of this collection:
Learn more about economics with this collection
How to manage risk
How to analyze investment opportunities
The importance of long-term planning
Related collections
Similar ideas to When rates fall again
Federal Rates
The Fed rate is also tied to inflation, which impacts earnings, which affects consumer spending. Inflation also moves hourly wages and direct interest rates. This can create the impression that interest rates and consumer spending are more closely related than they are.
The Federal Reserve...
The Federal Reserve
The Federal Reserve does not want to start a recession because part of its dual mandate is to keep the economy healthy. But, the Fed's dual mandate also includes keeping inflation low. A cure for rising inflation is higher interest rates, which slows the economy.
For example, in 1981, ...
Read & Learn
20x Faster
without
deepstash
with
deepstash
with
deepstash
Personalized microlearning
—
100+ Learning Journeys
—
Access to 200,000+ ideas
—
Access to the mobile app
—
Unlimited idea saving
—
—
Unlimited history
—
—
Unlimited listening to ideas
—
—
Downloading & offline access
—
—
Supercharge your mind with one idea per day
Enter your email and spend 1 minute every day to learn something new.
I agree to receive email updates