BREAKING: The FED Just RAISED Interest Rates - Stocks Falling, Housing Market FROZEN!
Graham Stephan
Fed Raises Rates For First Time Since 2023 0:00
A few hours before this video, the Federal Reserve raised interest rates by 25 basis points, ending a rate cutting era. The real worry is whether this is a one time move or the start of a whole new rate hiking cycle. Inflation is moving the wrong way again, the government is adding more than two trillion dollars a year to the national debt, and a bond market bailout is not making a difference. The strategy investors have used for the last two years may have just stopped working.
Inflation And Jobs Data Behind The Move 1:31
Producer price inflation, which measures what businesses pay before costs reach you, came in at 0.4 percent month over month and 5.4 percent over the last year. The headline number, CPI, came in at 3.4 percent, though most of that came from oil prices. Meanwhile August payrolls rose by 162,000 jobs, more than double what was expected. Since the Fed's two main jobs are controlling prices and keeping people employed, strong job numbers give it room to raise rates without hurting employment.
Why Bad News Helps Stocks 3:00
In the current environment, bad economic news is actually good for stock prices, because anything that points toward lower rates gets rewarded. Weak job numbers, high unemployment, and poor economic data are all treated as good for stocks since they raise the odds of a Fed rate cut. Good economic data works the opposite way. Looking ahead, there is a mix of good and bad. The US economy still looks resilient enough to avoid a near term recession, and Anthropic forecasts 33 percent GDP growth by 2030 because of AI, alongside a 10 percent chance it estimates of worldwide destruction. On the bad side, since 1930 a new Fed chair taking office has historically brought an average stock decline of 16 percent, September tends to be the weakest month for stocks, and bond yields are now competing seriously with stocks.
Housing Market Adjusting, Not Crashing 7:31
Median home prices are still up about 3 percent year over year, but new listings have surged and inventory just hit a six year high. Mortgage rates climbed from under 6 percent in February to near 7 percent now, driven by rising oil prices and inflation, which is pushing buyers out and sellers to list before year end. Some cities have already dropped over the past year, including Austin down 8.1 percent, Clearwater down 5.6 percent, Memphis down 4.1 percent, and Oakland down 3.9 percent. Even so, homeowners hold record equity, lending standards remain sound, and inventory is still constrained, so this looks like a normalization rather than a crash. Historically, rates rising and home prices falling together is rare, since rate hikes usually happen during strong economies that support higher home prices, while rate cuts usually signal a weakening economy that can drag prices down instead.
The Rate Decision And What Comes Next 10:31
The Federal Reserve voted unanimously to raise rates by 25 basis points, judging that inflation and employment are strong enough for the economy to handle it even if stock prices fall. The Fed only controls short term borrowing rates between banks, while longer term rates for mortgages and business loans are set by supply and demand in the open market, and those have already been rising as investors demand more compensation for inflation risk and as other countries sell US holdings. In its economic projections released the same day, the Fed signaled one more rate increase by year end, then holding rates through most of 2027. The likely paths ahead are either a spiral of growing debt, rising inflation, and market volatility, or an AI driven productivity boost that Anthropic estimates could add several extra percent to GDP annually, with an extreme case adding 30 percent, though at the cost of a sharp rise in unemployment. Since markets are forward looking, current data is already priced in, and volatility is expected to continue until there is more clarity on inflation, oil prices, and the conflict in the Middle East.
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