What Rates Up Again Means
Tool #1 To Stop Inflation : Rates Rising. Bad For Real Estate Buyers and Seller’s Prices
The Fed is going all out to slow inflation and escalated the battle this week of a half-percentage-point increase on the federal funds rate.
What’s more worrisome is that it planswhat it calls "ongoing increases in the target range" and suggested potentially 2.75% by the december of 2022, and as high as 3.3% by mid-2023.
Tool #2:
Fed Stops Acquiring Mortgage Backed Bonds - Bad For Real Estate but May Stop Inflation
Also… the FED is undoing it’s “quantitative easing” (QE) program where it has acquired trillions of of government and mortgage-backed bonds since 2008.
This made a huge impact in adding liquidity to markets and jacking up stock prices in the process. Starting in late June, the Fed will shed $95 billion in Treasury securities and mortgage-backed bonds from its balance sheet each month. That's far more than what it did in it's last attempt to wind down QE in 2017.
The Fed’s recent moves reflect an increasing sense of urgency about trying to slow inflation, which is a threat to the financial wellbeing of investors and consumers alike. As Fed Chairman Jerome Powell explained, "Inflation is much too high, and we understand the hardship it is causing. We are moving expeditiously to bring it back down. We have both the tools we need and resolve to restore price stability on behalf of American families and businesses."
But while higher rates should tame inflation, stock market volatility will continue to increase. …It has a very good chance of tipping the economy into recession.
