Posted on 01/27/2022 10:35:31 AM PST by Signalman
The Federal Reserve signaled Wednesday that it plans to begin raising its benchmark interest rate as soon as March, a key step in reversing its pandemic-era low-rate policies that have fueled hiring and growth but also escalated inflation.
With high inflation squeezing consumers and businesses and unemployment falling steadily, the Fed also said it would phase out its monthly bond purchases, which have been intended to lower longer-term rates, in March.
The Fed’s actions are sure to make a wide range of borrowing — from mortgages and credit cards to auto loans and corporate credit — costlier over time. Those higher borrowing costs, in turn, could slow consumer spending and hiring. The gravest risk is that the Fed’s abandonment of low rates could trigger another recession.
(Excerpt) Read more at reviewjournal.com ...
Milton Friedman demonstrated that all inflation is basically a monetary issue, so raising interest rates is the only practical tool for controlling it. As we saw in the 80’s it is strong medicine, but it works. The alternative is the destruction of the currency.
Geez. What a stellar idear. Fidiots!
Mortgage rates will continue to increase, so the real estate market will be under pressure. If one intends to refi one should do it asap.
This is like trying to tap the brakes on a vehicle going one hundred miles an hour on a patch of ice.
What could possibly go wrong?
;-)
You don’t care about the real estate market when refinancing your mortgage. You care about mortgage interest rates. Any increase in fed rates will raise the mortgage rate that you are worried about. My wife managed to get a 2% fixed a few months ago and I suspect it will be very difficult to do that in the future. Think Carter Years.
Yes, precisely.
I like the idea that rates will rise, but that won’t cure inflation. What cures inflation is when the government stops creating dollars. Raising rates can lead to a recession. Don’t ask me. I’m quoting Milton Friedman.
Thanks webheart. I have a 2.99% fixed rate VA mortgage now. No second, and we have a lot of equity in the house. I have been trying to decide if having more cash on hand is the way to go given current economic conditions. Thinking liquidity vs. investment in our house. On the other hand, cash is worth less in inflationary times. Biden’s economy is making all kinds of decisions harder.
This whole thing feels like Greenspan - 2000-ish...
due to congress fiscal recklessness over the last 20 years. there i fixed it.
Yep, about two raises and they will be forced to start lowering again. It’ll be “never mind”.
Don't forget that it also helps drive people into the stock market, which in turn helps prop the stock market up.
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