Yesterday the Fed increased the rate by .5%. This is the largest interest rate increase since 2000. They also are going to be shrinking its nearly $9 trillion balance sheet starting in June. These policies are likely to ricochet through markets and the economy as money becomes more expensive to borrow. Prices have been climbing at the fastest pace in 40 years for months now.
Mortgage rates have climbed nearly two percentage points since the start of the year. That is the fastest pace in nearly four decades. I expect the Fed to continue to make history and continue to raise the benchmark rate. Not sure if that will be enough.
The problem we will be facing is that the supply chain disruptions with China shutting down due to Covid, and of course the war in Ukraine, will continue to raise prices faster than the Fed policies can slow down the economy. This type of inflation cannot be controlled with rate increases.
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