A lot has happened since I penned the last installment of my newsletter. Continued rising inflation, historically high gas prices, the Federal Reserve’s March meeting that resulted in a rate hike, a volatile stock market, faster rising mortgage rates, and the crisis in Ukraine that is helping to fuel many of these changes. Let’s dive into some of this.
Inflation is hitting 10%, which is a forty year high. This level of inflation has been exacerbated by rising gas prices caused by the conflict in Ukraine and the reduction in the crude oil supply since we stopped taking oil from Russia. OPEC isn’t interested in increasing their production of oil so we will all just have to suffer with the higher oil prices as the conflict in Ukraine continues.
More Rate Increases Likely
As predicted, the Fed increased their target interest rate, the Fed Funds, by .25% to start on a path of increasing that target rate 3 or more times this year to help fight rising inflation. The markets had already assumed the .25% increase and only one Fed voting member wanted to see a .5% increase at the March meeting. That is an indication that the Fed can and will accelerate the rate increases if they find it necessary to reduce inflation at a faster clip. It’s a fine line between increasing rates to slow consumer consumption, which slows inflation, and slowing spending so much that the economy goes into a recession.
Mortgage rates would usually go down, in the short term, with a Fed rate hike intended to lower inflation. But at the same Fed meeting,