USA Fed Stresses More Interest Rate Hikes Needed To Bring Inflation Back To 2%

[Economy 52,844]

https://ca.finance.yahoo.com/news/fed-stresses-ongoing-interest-rate-hikes-needed-in-monetary-report-to-congress-174533781.html

 

The US Fed led by Jerome Powell stressed that interest rate hikes are likely not finished yet and that more will be required to bring inflation back down to the 2% target

 

The US & New Zealand recently surpassed Canada as the advanced economies with the highest interest rates. Canada at 4.5% and the US & New Zealand 4.75%

[TEANUS 16,140]

Rates are truly awful right now. I had to get a new car and they tried to sell me 9% at first  i haggled down to 6.3% and that felt like brain surgery

edit - I’m in the us

[Economy 52,844]

17 minutes ago, TEANUS said:

Rates are truly awful right now. I had to get a new car and they tried to sell me 9% at first  i haggled down to 6.3% and that felt like brain surgery

edit - I’m in the us

Yeah. Given the price of things it's very unaffordable.

 

Interest rates are not actually high by historical standards. They just were crazy low between 2008 to 2022. That's 14 years of low rates which if ur like under 35 u never knew any different in your adult/working life.

 

But last time rates were at this rate stuff like real estate was cheaper. The price of stuff is still reflecting low interest rates which makes the principal high still while rates are also higher now. The two combined are tough

 

Price of stuff like real estate should in theory drop with higher rates... But it takes time

[TEANUS 16,140]

6 minutes ago, Economy said:

Yeah. Given the price of things it's very unaffordable.

 

Interest rates are not actually high by historical standards. They just were crazy low between 2008 to 2022. That's 14 years of low rates which if ur like under 35 u never knew any different in your adult/working life.

 

But last time rates were at this rate stuff like real estate was cheaper. The price of stuff is still reflecting low interest rates which makes the principal high still while rates are also higher now. The two combined are tough

 

Price of stuff like real estate should in theory drop with higher rates... But it takes time

Educate me hon! Thanks for all this info

[Economy 52,844]

16 minutes ago, TEANUS said:

Educate me hon! Thanks for all this info

Yeah basically when the economy is hot and strong (which also tends to lead to higher inflation) they raise interest rates to keep demand sustainable and to cool inflation

 

When the economy and demand is weak, they lower interest rates to encourage borrowing and spending

 

Because the 2008 crisis was quite severe and recovery slow, interest rates stayed very low for an unusually long time, nearly a decade and a half. Again, its part of the reason many ppl don't know any different. But anyone who is older remembers mortgage rates being 12% to 18%. By historical standards the current rates are only average. They have at times been much higher

 

But these low rates for 14 years also made it possible for assets to inflate in value especially stuff like real estate because people can bid the market higher when credit is cheaper, current prices would never be possible when interest rates were in the double digits. And of course speculator investors and real estate companies took advantage of cheap rates to load up on borrowing to invest, which in turn raised prices even higher

 

Now interest rates are going back to normal yet assets still cost what they cost when rates were low. That makes it painful right now if u have debt you acquired when rates were super cheap

 

My concern is that since investors already got rich and took over a big chunk of the market, they will not allow prices to drop as much as they should with rates now rising. Or at least not as quickly if it does