Thoughts on current interest rates???

[Holyoak]

What do you think about where they are today, the pace of change, etc?  Not that I can give much more than a gut feeling, but they seem way too low, for far to long, and the pace of increase too modest.  Can't help but think the rate should currently be around 4%+, with increases from zero, having started a few years back.  Thanks for the replies, and education on this matter.

[dividendman]

My thoughts just like the thoughts of others, will be pure speculation.

Rates are low, yes. Inflation is also low. Rates don't have to go up dramatically from here and could go down.

I was actually thinking that the opposite of "stagflation" could happen. We could be getting to a period where productivity gains allow for greater profits AND reduced/stagnant prices, which would lead to lower interest rates.

Anyway, trying to predict interest rates is like trying to predict the short-term movement of the stock market - it's a fools errand.

[Hargrove]

Half the purpose of raising the interest rates is restoring the Fed's ability to mess with them if there's another problem.

Along those lines, the Fed is probably putting itself into a good position at a reasonable speed.

Should they be higher? Probably not. I would say they did a good job measuring out the hikes because of market meta. They had to go very slowly in increasing interest so a) the market wouldn't panic and b) panic wouldn't cause a new economic problem and c) they wouldn't get blamed (for new economic problem).

I agree with L.A.S. Investing in bonds is silly. My only bond component in my portfolio is VCLT.

[talltexan]

Agreed that it's equally important to watch the treasury yields as it is to track the Fed Funds Rate: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

Note that current yield on the 10-year is 2.16%, much more frightening than the 2.3% indicated in a previous comment.

[matchewed]

Fear is the mind killer?

[Radagast]

Interest rates are fundamentally based on perceived risk, and the extent to which people are willing to assign less importance to the future than the present. Bill Bernstein (The Four Pillars of Investing) give a brief history of annualized interest rates which is approximately:
100% Hunters/gatherers
25% Ancient Greek marine insurance
12% French feudal usurers
4% Roman Empire at peak
2% British Empire at peak
0% Europe and Japan today.

Where do you think the US stands on this conceptual scale? I'd say 4% is the upper limit. Interest rates above 4% for a large stable nation such as the US are an anomaly, a "deep risk" which is not expected. The bond market seemingly agrees, as 30 year zero coupon treasury bonds are yielding under 3%.

[talltexan]

Great interest rate history! My Latin professor always talked about how interest rates fell from 12% to 4% overnight when Augustus Caesar defeated Antony and "laid his hands on the gold of Egypt". I thought it was a money supply story, but I see it was about the resolution of political risk by ending the Civil War.

[PizzaSteve]

I think they stay low for a while.  Super large amounts of cash available, low velocity of money,  need to keep businesses hiring = not much to drive up price of capital.  It's supply and demand.  I think rates stay low indefinitely.

[respond2u]

Fear is the mind killer?

I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain.