Jerome Powell Believes High Inflation Is Only Temporary – How Are Interest Rates Affected?
Federal Reserve Chairman Jerome Powell, speaking to Congress on July 15, said rising inflation was temporary as concerns about overheating the economy grew.
“Inflation has increased significantly and is likely to remain high for the months ahead before it eases. Inflation is temporarily boosted by base effects as the sharp pandemic-induced price declines from last spring fall out of the 12-month calculation, ”said Powell. “In addition, the strong demand in sectors where production or other supply constraints are limiting production has led to particularly rapid price increases for some goods and services, some of which should reverse when the effects of the constraints resolve.
“The prices of services that have been badly hit by the pandemic have also skyrocketed in recent months as the demand for these services has increased as the economy re-opened,” he continued.
Since inflation is temporary, the Federal Reserve could keep the federal funds rate low for now, which in turn would keep interest rates low. If you are interested in a personal loan, now may be a good time as interest rates are at all-time lows. Visit Credible to explore your personal loan options.
CONSUMER PRICES JUMPING TO THE HIGHEST RATE SINCE 2008 – SO COME TO CASH NOW
How does inflation affect interest rates?
The rate of inflation indirectly affects interest rates through monetary policy, which is set by the Federal Reserve in its meetings of the Federal Open Markets Committee (FOMC). The Federal Reserve aims to keep interest rates at levels that will keep inflation at 2%. If inflation gets too high, the Fed will raise interest rates to stimulate economic activity such as lending or spending.
Currently, consumer prices rising with an annual inflation rate of 5.4%, according to the US Bureau of Labor Statistics (BLS) June Consumer Price Index (CPI). Common causes of inflation are price pressures from rising demand, supply bottlenecks and, in this case, a rapid recovery from the COVID-19 pandemic.
While prices rise well above the Fed’s 2% target, Powell stated that the FOMC is focusing more on long-term inflation and the impact of that spike over a longer period than current inflation data.
“To avoid prolonged periods of unusually low or high inflation, the monetary policy framework of the Open Market Committee (FOMC) seeks longer-term inflation expectations anchored at 2%, the committee’s longer-term inflation target,” said Powell. “Measurements of longer-term inflation expectations have risen from their pandemic lows and are in a range broadly in line with the FOMC’s longer-term inflation target.”
Powell stated that the Fed wants to see inflation above 2% for some time before raising rates.
With prices at all-time lows, consumers have more time to take advantage of the low-price environment and save money. Private borrowers of student loans, for example, can save their monthly installments significantly by refinancing. Visit Credible to compare multiple lenders at the same time and find the one that suits you best.
ATLANTA FED PRESIDENT PROJECTS 2022 INTEREST RATE INCREASE: WHAT THAT COULD MEAN FOR YOUR MORTGAGE REFINANCE
Is now a good time to refinance?
Interest rates are low, and despite rising inflation, the Federal Reserve plans to hold them that way. But when economic growth improves, it will be necessary to raise interest rates. Economists and even some Fed presidents are currently predicting a rate hike could be necessary next year. And mortgage rates could rise sooner – Fannie Mae predicted the 30-year fixed-rate mortgage will rise to 3.1% by the end of this year.
In addition to today’s low interest rates, mortgage refinancing can also benefit from the advantages of the Biden administration Abolition of the disadvantageous market refinancing fee. With that fee gone, homeowners will find it even more beneficial to refinance their mortgage as they could save about $ 1,400 in fees.
With interest rates at all-time lows, Americans could save money on new loans or refinance their current loans. If you are interested in refinancing your mortgage but have questions, Visit Credible to speak to a home loan expert and see how much you can save on your monthly payments.
THE BIDEN ADMINISTRATION HAS ONLY MADE IT CHEAP TO REFINE YOUR MORTGAGE
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