Comment by apo | Hacker News Reader

Comment by apo | Hacker News Reader

Parent Full thread

That's an awful lot of explaining for a pretty simple concept. Fed funds rate is a benchmark interest rate that Wealthfront, like many products, is tied to.

Rate goes down, and your interest payment goes down.

I suspect this has to do with fact that there has never been a rate decrease in the lifetime of the product:

> Wealthfront Inc. is an automated investment service firm based in Redwood City, California,[2][3][4][5] founded by Andy Rachleff and Dan Carroll in 2008

https://en.wikipedia.org/wiki/Wealthfront

The decrease came only as a surprise to those who weren't paying attention.

The rate is in all likelihood headed to zero and below, just like so many other industrialized economies have already done.

If that comes as a surprise then once again, you haven't been paying attention.

Indeed, word on The Street leading up to the announcement was 0.25 rate cute was most likely followed by a small likelihood of 0.50 cut. No surprise.

I disagree, however, that rates are going to zero in the States. ZIRP/NIRP are going very badly in EU and JP and The Fed does not want to replicate that outcome. What's more likely is a long-term interest rate peg before cutting short-term rates that low.

PSA: You can track market sentiment with regards to rate cuts here: https://www.cmegroup.com/trading/interest-rates/countdown-to... (CME FedWatch Tool)

For the average person, the fed funds rate is a complicated thing that requires background about how money moves between financial institutions that most people simply don't have. The HN crowd is going to be fairly educated, but for the average person, explanations of these types of concepts are valuable.

That said, it's just fundamentally dishonest when they say this came as a surprise. Everyone in the financial industry expected it and the market has been pricing it in for quite a while. They clearly know this is going to be read by people who are of below average financial literacy and are blatantly trying to deceive them.

There are a lot of people who are logical, intelligent, earn money and understand neither numbers or finance. I have some sympathy for the financial companies trying to explain what is going on; the system is only simple to those that understand it.

Reply on news.ycombinator.com