The Federal Reserve raised the federal funds rate by .25% this week which brings the range to 4.75% - 5.00%. That’s the highest the rate has been since 2007. Just a couple of weeks ago, Fed chair Jerome Powell suggested the debate would be between raising rates either a quarter-point or a half-point. But the recent turmoil in some banks is forcing the Federal Reserve to change plans. WSJ The Fed indicated their expectation of only one more rate hike this year. CNBC The Federal Reserve participants expect the Fed rate to be lower by the end of 2024, down to 4.3%, and lower still by the end of 2025 to 3.1% as the chart below shows. Also of note in the chart, they expect inflation to be close to the target of 2.0% by 2025 while GDP will be growing only at about 1.9%.
Chart: Federal Reserve
Banks Expected to do the Work of the Fed: What may result from the government intervention of a few banks is more restrictive credit lending by banks. If banks pull back on lending, it will curtail some business activity. In short, banks may be able to accomplish what the Fed has been trying to accomplish with aggressive rate hikes – which has been to considerably slow the economy and job market. CNBC One economist believes that tightening financial conditions will equate to a 1.5% increase in the Fed Funds rate. Reuters
Why This is Not a Repeat of the 2007-2009 Global Financial Crisis: Experts seem to agree that the current banking situation is not the same as the 2007-2009 Global Financial Crisis. Banks are in much stronger shape today, have higher deposits vs. loans, and the assets banks are holding are of higher quality. Also, the U.S. government response has been swift and the economy is stronger. Business Insider The current banking situation, as it stands now, is more of a liquidity issue than a credit issue, and the Fed has stepped up considerably to help with liquidity. Yahoo Finance
Was Signature Bank Made an Example? Three banks have been taken over either by governments or purchased by stronger banks arranged by governments. Regulators appeared to know about the problems at Silicon Valley Bank NYT and Credit Suisse had a long stretch of scandals and quarterly losses that occurred over many years. Bloomberg Some experts believe that Signature Bank was fine but the government took it over to punish it for accepting deposits from cryptocurrency firms. They state the government wants to send a message to banks to stay away from cryptocurrency altogether.
Barney Frank Was Right About Signature Bank - WSJ
Financial Planning/Investment Strategy Corner:
Tip On Reaching an IRS Agent For Help: Anyone who has tried to contact the IRS during tax season knows you are likely to be on hold for hours. But some tricks can help you get an agent on the line and I’d like to extend thanks to the client that passed this tip along. They had to contact the IRS three times this tax season and it worked every time. They called at 7:00 AM sharp and followed the prompts in the blog article link and they never waited longer than 15 minutes for an agent. And the good news is that IRS agents are very knowledgeable and helpful – but you have to get connected with one! So, if you have to contact the IRS this tax season, give this a try. AmyNorthardCPA
Quick Hits:
- Gratitude attitude – how to pass it along and help yourself along the way: Axios
- What does it mean to really, truly rest? SELF
- 7 tips on how to fit more exercise into your daily routine: CNET
- DNA analysis of Beethoven’s hair reveals some mysteries: WSJ Current Biology
- Should you eat carbs after a workout? VeryWellFit
- Finland is the happiest country in the world (again!) and they are giving away free trips to travelers who want to learn how they do it: CNBC Visual Capitalist – Global Happiness Map (Maybe governments should focus on happiness more - see quote)
Ruminating Thoughts and How to Stop Them: If you keep rerunning an old conversation or situation in your mind that is not going away, in psychological terms, you are ruminating. Ruminating is similar to emotional processing in that they both focus on our problems and emotions, but ruminating does not lead to acceptance or the release of negative emotions. In contrast to how emotional processing can lead to acceptance or release, ruminating can keep you stuck, negative, and does not lead to any release. Rumination can be caused by stress and stressful situations, anxiety about upcoming events, personality traits such as perfectionism, and other factors. Many things can help overcome rumination including meditation, exercise, distracting yourself, or even just going outside. I will be giving these a try next time I find myself rerunning an old conversation. VeryWellMind Healthline
Think Spring! Just because there is still some snow on the ground doesn’t mean it’s not too early to start planning your home garden! Click on the links for 2023 garden trends and the best time to plant different vegetables and herbs. Almanac – 8 Garden Trends to Try in 2023 Almanac – 2023 Planting Schedule
Quote: “The happiness and prosperity of our citizens… is the only legitimate object of government and the first duty of governors.” Thomas Jefferson
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