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? How these economic conditions could impact important components, such as real estate/housing, the stock market and bond yields, and bank interest rates, is often significant and it is generally prudent to proceed. , as an informed individual! With that in mind, this article will briefly try to consider, examine, review and discuss 3 specific areas, in terms of how general conditions can influence them.

1. Real Estate/ Housing: How might 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, in large part because the costs associated with 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, the pace of sales on these properties has slowed. In recent times, as mortgage rates have remained at and/or near record low rates, largely due to an ongoing period, the Federal Reserve Bank maintained extremely low fund lending rates! The combination of the impacts of the prolonged and horrible pandemic, cheap money (creating extremely affordable mortgages), and related changes in lifestyle, etc., have caused a significant increase in the costs of buying a home. . 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!

two. Stock Exchange: For the last few years, we have witnessed a rising stock market. Nearly every index has 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 such low interest rates, alternatives like bonds and bank accounts pay very little! The probability is that when rates go up, it will eventually have an adverse effect on stock prices/popularity!

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

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