Mexican Media Brands
Real Fed Funds Rate Increases First Time in Five Months
Year over year, the real Fed funds rate continues to increase at a slower rate. If inflation remains stable then the real Fed funds rate will continue to increase at a slower rate through March 2014.
#economics
.JPG;width=70;height=70;mode=crop)
Share
The real Fed funds rate is simply the Fed funds rate minus inflation. Even though nominal rates can't go below zero, the Federal Reserve can push real rates below zero if price inflation is greater than the interest rate. Since March 2010, the real Fed funds rate has been negative because the rate of inflation has been higher than the interest rate.
The annual rate of inflation in September fell to its lowest rate since April 2013. Therefore, the real Fed funds rate fell for the first time since April 2013. Since that time, the real rate has been virtually unchanged. Year over year, the real Fed funds rate continues to increase at a slower rate. If inflation remains stable then the real Fed funds rate will continue to increase at a slower rate through March 2014. But, in order for the change in the real rate to go negative, inflation will have to pick up significantly. A negative change in real rates tends to be a very positive sign for durable goods manufacturing and capital equipment spending.
The Fed funds rate is an important leading indicator for the following industries: appliances; automotive; custom processors; furniture manufacturing; hardware; HVAC; metalcutting job shops; off-road and construction machinery; petrochemical processors; plastics and rubber; pumps, valves, and plumbing products; textiles, clothing, and leather goods; and wood and paper.
RELATED CONTENT
-
China and U.S. OEMs
When Ford announced its 3rd quarter earning on October 24, the official announcement said, in part, “Company revenue was up 3 percent year over year, with net income and company adjusted EBIT both down year over year, primarily driven by continued challenges in China.” The previous day, perhaps as a preemptive move to answer the question “If things are going poorly in China, what are you doing about it?, Ford announced that it was establishing Ford China as a stand-alone business unit.
-
Inside Ford
On this edition of “Autoline After Hours” Joann Muller, Detroit bureau chief for Forbes, provides insights into what she’s learned about Ford, insights that are amplified on the show by our other panelists, Stephanie Brinley, principal analyst at IHS Markit who specializes in the auto industry, and Todd Lassa, Detroit Bureau Chief for Automobile.
-
On Global EV Sales, Lean and the Supply Chain & Dealing With Snow
The distribution of EVs and potential implications, why lean still matters even with supply chain issues, where there are the most industrial robots, a potential coming shortage that isn’t a microprocessor, mapping tech and obscured signs, and a look at the future