US Fed hikes interest rates by another 0.75%
(CNS): The US Federal Reserve has again raised interest rates by three-quarters of a percentage point as it battles the worst inflation in 40 years. Cayman banks are expected to follow suit, pushing up local lending base rates to 7%. Fed Chair Jerome Powell said the pace of hikes could soon slow down but he cautioned that there remains extensive uncertainty about how high rates will need to go. This is the fourth three-quarter-point increase in a row.
The announcement came at a news conference following two days of meetings among members of the Federal Open Market Committee. Powell spoke of the importance of price stability and said that increases would continue until inflation is reduced to around 2%.
Following the 0.75% hike in September, several local banks increased rates within a matter of days.
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Category: Banking & money, Business
Fully expect there will be more motivated sellers hitting the real estate market.
Or more “price adjustments”. We were fortunate to have gotten a way overmarket covid driven offer on our home back in 2021. Very happy to have sold and now have no debt and will wait for a market correction before jumping back in.
EFFECTIVE RATE = Fed Prime Rate + Risk Exposure Factor.
FED PRIME RATE is derived by Supply vs. Demand Analysis
While, this +1, +1.5, +2, +3, etc. is the associated risk exposure factors (i.e. volatility) of doing business,such as:
✓Credit rating risk (consumer/customer credit risk)
✓Time & inflation risk (market risk)
✓Tax risk considerations ( government monetary & fiscal policy risk)
✓Refinancing risk (market & operational risk)
✓Convertibility risk of the particular loan (liquidity risk)
Obviously, the Local Banks strongly believe doing business in the Cayman Islands is justifiably high risk giving the volatility index/risk exposure assigned to local customers on their originating mortgage or loan agreement.
These banks, using their law firms of choice, have already commenced the delivery of home/property foreclosure notices & warnings letters across the Cayman Islands. The Couriers/Service Agents have been extraordinarily busy, with NO sign of relenting. Ooouch😩
The Private Investigator (PI) techniques to locate & serve legal notices have been amplified.
One Lady said they must have had tracking devices placed on her vehicle or cameras installed outside her private residence, by how quickly they located her 😂😂😂😂. Allegedly, the legal letter was on behalf XXXX (the Law Firms “Client”) threatening foreclosure proceedings for two missed payments, under CI$1300 Total [=$650 Sept. + $650 Oct.]. So, much for the ’90-days/3 payments past due’ rule enshrined in the bank foreclosure law. This is surely rogue banking & menacing.😏
If true, SHAME ON YOU XXXX!!!!
The Feds have predicted at least four (4) rate hikes per year until inflation is under control and goods/services become more affordable. A recession is anticipated for sometime next year, but the rate hikes may take us into early 2025 before consumers can realize any “real” change in purchasing power.
With each rate hike, it is more difficult to afford an existing mortgage or qualify for one.
A US$450K Mortgage are now costing homeowners US$3000 in monthly premiums; that is, double what U.S. homeowners paid this time last year.
In Cayman where (for some unfathomable reason) interest rates are exponentially higher than the U.S., it is crazy to think of the unbearable monthly premiums people are now having to pay, just to service their mortgages/loans.
It is also important to note, how these local banks are reluctant to offer affordable fixed rate mortgages as part of the originating mortgage or a mortgage restructuring.
The next 24 to 36 months is going to be a grim period for many people holding high interest debt(s). – e.g. credit cards, mortgages, land loans, car loans, etc.
And, staff lay-offs are imminent once the recession arrives.
If there is one thing I hope people get from reading my comment, it is that we all need to start thinking differently. There are many places around the world that are implementing bitcoin as a means of payment for goods and services. When currencies start to crash because lawmakers do what they think is best, a decentralized digital currency built on a network that incentivizes and rewards work with a limited supply can be the answer.
The monetary system is flawed. The world cannot continue to implement short term solutions over decades and decades like raising and dropping interest rates to curb human behaviour and desire. No one in their positions of power are as smart as they think they are. All they have done is learn to regurgitate words from a book they were told to learn in school. These same people who leave what are considered the top schools worldwide and enter these massive organisations and government organisations, achieve nothing but pay themselves a big salary.
This slave mind to the current system is like someone doing work on your house, did the work completely wrong and is advising that their way is the only way that will fix it. The same monetary policies that cause these issues have been in place for decades and there is no incentive for any change because too few has too much power and benefit from the system being in place.
I know many of you on here do not like bitcoin, but the concept of bitcoin, a decentralized means of payment is what will create true change for the world. The issue right now is that currencies are backed by nothing except debt and the supply can be increased by the swipe of a pen by a select few.
Also, there are a handful of organisations that are ‘trusted’ to carry out the oversight and governance of transactions. We are all subject to those who control the system we are forced to operate within (currency). The money in the bank is not ours because when a bank run happens, refer to Turkey right now, the banks will tell you its not their problem. Bitcoin fixes this.
Ignore the term bitcoin and focus on the system behind it. Focus on the decentralized system which gives you true ownership of your currency. A currency that cannot be controlled by a select few because they want to stack the deck in their favour.
Eventually the “select few” will control cryptocurrency as well, don’t fool yourself. Perhaps by then you would have cashed out with earned millions. Right? 😉😉
Cash out to a stable coin. Never fiat.
It’s so stable…. “FTX coin traded at around $22 on Monday and sank below $5 Tuesday afternoon in New York. The selloff wiped out more than $2 billion in value in the space of 24 hours.”
Keep your faith in the money printer, good luck. Btw it’s Bitcoin not crypto
Yeah there’s probably some good tech in there, but it’s foolish to think a nation will let you use its resources and at the same time relinquish control over its monetary policy and capital controls.
Tulips. That’s where the action is.
but yet all the oil companies just announced record profits. if anything is to change it’s to stop supporting people in any public office that support the oil companies.
The price of oil is high because the supply is low. Now ask yourself, why is the supply low? Prior to two years ago there was a massive surplus of fuel and gas was cheap.
Could it have anything to do with the war on fossil fuels?
The peak oil thesis was debunked a decade ago. Sadly, there’s still a lot more petroleum than environmental time, and flow of supply (and thus price) has long been politically and cartel controlled. Refinery capacity is somewhat stagnant and finite and demand remains high. That’s the choke point. Folks don’t pour crude oil into their cars, for now, most need refined gasoline. In fact, there is recent history of negative pricing for both gas and oil when delivery/takeaway to refineries becomes impeded or impossible. Producers will then pay you to come on over and take it off their hands. It’s expensive to turn it off.
https://oilprice.com/Energy/Natural-Gas/Texas-Natural-Gas-Prices-Go-Negative.html
Or OPEC cutting supply to raise the price maybe?
But yet a certain bank will not let you open a higher rate interest savings account into which transfer money from an ordinary savings account- because you can out money into iT!!LOL But open a fixed deposit account where you cannot put money into…and earn less interest!! LOL Another bank does not have higher interest savings account. Look at the extiornate charges deducted. Look at all the banking options and higher interest account options available in UK not available here. Let’s not mention the insulting customer service of some who think you owe them.
Error “extiornate” not found
aren’t ye a smarteee
Two banks refused to exchange £20 notes, one of them showed they had the new notes but would not exchange having an account with them for 20+years. Few weeks later big advert in newspaper for people to exchange the notes. What is that? Is it legal for the banks to have refused the exchange of valid Queen’s currency?
It’s just paper, worthless paper
end the war…that is the solution.
These hikes might not make much impact on our wealthiest, but for middle class (including many of our tourist class), the road to Fed’s intervention targets will be rough. To the north in Canada (who are only just starting), condo sales are down 86% and home sales are down a paralytic 96% y/y and breaking from Goldilocks 10yr avgs. Cayman should maybe consider incentives/passenger tax breaks on airline ticket prices, if the goal is still a “back to normal” high season.
This coming season is shaping up to be the busiest we’ve ever had, by a lot.
Democrats doing what democrats do!
Tell me you have no idea how the Fed works without telling me you have no idea how the Fed works.
They print currency
10:57 – The Federal Reserve Bank is independent as it decides on interest rate changes based on studies conducted by its 12 districts. In fact, the chairman of the FED was actually reappointed by Trump. You should understand how things work before posting your trash that’s based on your solid ignorance.
and what factors have curved the outcome to negative growths as seen recently?
Democrats!!!!!!!!!!!!!!! Democrat policy.
Let me guess…CNN viewer???!!
negative growth? hahaha!!!Let me quess…fox News or magic mushrooms?
Negative growth is a decline in a company’s sales or earnings, or a decrease in an economy’s GDP during any quarter. Declining wage growth and a contraction of the money supply are characteristics of negative growth, and economists view negative growth as a sign of a possible recession or depression
Let me know if you need help with anything else?
caymankind, thanks for clarifying that you just copy random things without understanding. wage growth is actually something the fed is trying to slow to tame inflation. jobs in the USA have been increasing at record numbers. again, understand first before posting trash.
let me know if you want more. BTW, your screen name says a lot… A FAKE!
CaymanKind you’re clueless. Of course you assume that those disagreeing with you are politically motivated, as opposed to just knowing more about the subject than you.
The administration and Congress spending trillions is independent of the Fed. Or didn’t you notice the “anti-inflation” bills?
Ya’ll miss Trump yet??
I sure do!!
hell no. also if you think that this is a issue that has anything to do with Democrats or Biden you’re obviously so misinformed that your head’s already gone.
“Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’. The answer is yes, that’s what I’m telling you.”
Joe Biden
Cult member.
ugh what are you doing here, get back to Ohio
Whyy should Cayman prime for residential mortgages be 3% over US prime? Cayman banks do not need to borrow from US Fed as they are flush with cash due to CIMA requirement that insurance companies hold their mandatory capital with a class A bank. This adds up to billions of dollars annually and is enough for Cayman’s residential mortgage lending activity. CIG Ministry of Finance and Hon Minister ought to hold Class A banks to task. CIMA will recite their usual mantra that consumer protection is not in their mandate.
There is a difference between the Federal Fund rate and the US prime lending rate. Most cayman banks are US prime+1 or +1.5.
The US prime rate tends to be 3% higher then the Federal funds rate.
Really?
The (Fed) Prime Rate , 7.00% as at Tuesday, 2nd November, 2022.
The previous Fed Rate increase (⬆️0.75) was on 21st September 2022.
The Fed fund rate rate is around 4%. That is different for the US prime rate which is around 7%. The Federal reserve does not set the banking prime rate so I’m not sure what you are getting at. Yes they do go up together but they are not the same thing. The is no such thing as a ‘(Fed) Prime rate’ which you speak of.
“ The federal funds rate is the interest rate commercial banks charge each other for overnight lending. Generally, the prime rate is about 3 percent higher than the federal funds rate. That means that when the Fed raises interest rates, the prime rate also goes up.”
Meanwhile, according to CIREBA, in Cayman La La land property prices can only ever go up. Recession, what recession? [Realtor puts fingers in ears “I CANT HEAR YOU I CANT HEAR YOU I CANT HEAR YOU].
There will be NO* repossessions
Prices will NEVER* fall
There is a MASSIVE* shortage
This is a STUPENDOUS* investment
BUY* while you can!!
*Reader, there will be, in fact there are now.
*Reader, prices are already sliding and this fall is only accelerating.
*Reader, there isn’t, there are so many empty, economically unrentable properties with more coming on the market every week.
*Reader, this is a stupid (not stupendous) investment.
*Reader, please try to catch this falling knife or I won’t get my sales commission.
Remember when the real estate market was so bleak they lowered the stamp duty rate to 5% and commissions were slashed? Real estate is cyclical, give it time.
Raising rates to slow growth during a period of world wide supply chain shortages is a first in my lifetime. The shortages are the result of 2 years of hammering the labour force with idiotic policies that not enough people questioned. Time to pay price.
Brace yourselves.
It’s a question or supply and demand. With limited supply and high demand the prices of all finite assists/resources will go up. The Fed is attempting to get rid of demand by tanking the economy and making sure people have less disposable income to purchase said items. Once we are all broke the supply will be able to catch up
I’ve already gotten 2 emails from my bank for the year so far increasing my interest rate, and I can now expect another… The payments have gone up $350 just for the mortgage alone, and CUC has gone up at least $250 as well. Meanwhile pension is now being withdrawn so that’s even less money to work with every month.
This is (a whole Planter’s family sized can of assorted) nuts.
The financial burdens on these Cayman Islands are great, heavy and MANY!
#PeaceBeStill🙏📖🕯️
Can government step in and put a cap on how high banks can increase the interest rates?
The banks are not required to increase their rates if they don’t want to, is that correct?
Can someone give me the answers, because I don’t understand.
Thanks, Putin.
you really believe this is because of Putin! WoW! you have your head in the sand! This all started with the US printing 4 trillion dollars in 1 year! never happened before in History! This is the result of silly policy by silly politicians. Not some maniac in Russia
You mean PACT
The obvious collusion that goes on here between banks is also disgusting. With a local market too small to be attractive to a disruptor to set up, we’re stuck with charges for everything, somehow incurring charges for certain aspects of online transactions, and onerous checks to ensure I’m not laundering money… meanwhile these same banks provide financing to the shadiest of local developers.
Like the supermarkets, gas stations, telecoms, health and motor insurance, etc, the consumer just gets screwed at every opportunity.
Federal Reserve raises interest rates to reduce demand in the US economy to bring down inflation. Inflation we are directly exposed to in Cayman due to our currency peg and being an import dependent nation. In most countries around the world this rate is tied to mortgages and also deposits. Why is the deposit rate unchanged at all local banks and still 0.001% when rates have increased by 3.75% this year alone.. We are being fleeced!
Banks increased mortgage rates within several days. Savings and deposit rates have barely moved. The banks are reaping the profits (check Butterfield’s recent results announcement prior to this rate hike). This is something that needs to change.
Take your savings out of the Banks and invest them. Holding money in a savings account is not investing and will not increase your purchasing power. Take inflation and add the annual fees Banks charge, and you’ll see how much money you’re losing.
This. I’m 32, but when I was 26 I started to really take a look at money. The fact that no school teaches money management or even how money works, despite money being the driver of the system we have to operate in upsets me.
But, I guess this is what those at the helm truly want. If you don’t understand the system how can you know they are doing something wrong?
I need at least 100k for cash flow but otherwise agree
free market…love it or leave it.