Why Are Rates Rising?

    You’ve probably heard interest rates are rising and inflation is at all time highs. So, what does that actually mean? I read this article and wanted to give my take on it.

    With the feds printing money, inflation has quickly risen. This scenario has resulted in the power of the dollar decreasing since more money is in circulation now. To control this, the feds are now raising interest rates to make borrowing money less incentivizing.

    What I like to remember is that although rates have increased compared to the all time low rates we recently experienced, they’re still considered to be on the lower end of what we’ve seen historically. Before 2009, mortgage rates specifically, had never been below 5%. Although rates, including mortgage rates, are higher than recently it could still be a beneficial time to borrow money.

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    The latest Reuters poll have economists predicting two half point rate raises by June. What’s interesting is these recent raises push predicted timelines up 3 months from end of year predictions, leaving more room for rates to increase at the end of the year. Rates are increasing quicker than predicted at the start of the year.

    With rates rising, there’s a chance of the economy growth slowing in the coming months but not seeing the effects of inflation slowing until a couple of years from now. Since inflation is not expected to noticeably slow until a couple of years from now, assets like real estate, could be an option to consider to protect your dollars as buying power continues to decrease. Borrowing money at rates that are below inflation, might make a lot of sense for your situation.

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