Economic Impacts of Inflation and Rising Interest Rates: 3 Specific Areas

Most of us have experienced a variety of economies, from inflationary to close to something resembling a recession. Since we can’t predict the future (at least, not accurately), doesn’t it make sense to be as informed as possible in order to proceed as logically as possible? The way in which these economic conditions could impact important components, such as real estate/housing, stock market and bond yields, and bank interest rates, is often significant and is generally prudent to proceed. , as an informed individual! With that in mind, this article will briefly attempt to consider, examine, review and discuss 3 specific areas, in terms of how general conditions may influence them.

1. Real Estate/ Housing: How could inflation influence real estate markets, in terms of prices, availability, affordability and whether, we witness, buyers, sellers or market neutral? We are currently experiencing the cost of new homes rising rapidly, largely because the costs related to many building materials, especially lumber, etc., have risen at a rate we have not seen before in recent years. memory! New home prices have therefore increased significantly, cost/price, and to date have slowed the pace of sales in these properties. In recent times, because mortgage rates have been at and/or near record low rates, largely due to a continuous period, the Federal Reserve Bank has kept fund lending rates extremely low! The combination of the impacts of the prolonged horrible pandemic, cheap money (creating extremely affordable mortgages) and related lifestyle changes etc. have caused the cost of buying a home to rise significantly. . If/when rates go up, how might that affect home buying, etc.? It is wise to recognize how a variety of economic conditions affect many components of our economy!

2. Stock Exchange: Over the past few years, we have witnessed a rising stock market. Nearly all indices have improved and benefited from prolonged low interest rates, meaning stocks have risen in popularity as an investment vehicle, largely because they’re the only game in town. . With interest rates so low, alternatives like bonds and bank accounts pay very little! Chances are, when rates go up, eventually, it will have an adverse effect on stock prices/popularity!

3. Bonds and banks: While low rates translate to what is called cheap money for those who borrow funds, when rates increase, borrowing costs will increase and the rates provided on these types of accounts will increase.

The more informed one is, the better one probably becomes, especially in changing times! Will you commit to being a wise consumer, etc.?