Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s).
If the Federal Reserve raises the federal funds rate today for the 17th consecutive FOMC session, then this will be the longest period of tightening in 50 years.
In Neil Henderson’s Tighter, Tighter: When Will Fed Increases Start to Pinch? [WaPo], he asks the question: So why isn’t the economy choking by now?
The answer? Money is still pretty cheap.
The Fed directly controls the interest rate banks charge one another for overnight loans, a benchmark known as the federal funds rate. That rate indirectly influences borrowing costs throughout the economy. The central bank uses its influence over rates to try to keep the economy growing at a sustainable pace without igniting inflation. Tighter credit dampens spending, making it harder for businesses to raise prices. Easier money does the opposite.
In contrast to the campaign of the past 25 months, the Fed has previously acted much more aggressively, pushing interest rates much higher and much faster to battle hotter inflation — and causing much more economic pain in the process.
Homeowners have not felt real pain yet. According to the Mortgage Banker Association, foreclosures and delinquencies actually fell year over year in the first quarter. However, the stats are expected to erode as higher energy costs and adjustable rate mortgage rate resets start to inflict more pain.
I think we are at the point of parity, and today’s expected increase along with an increasing probability of one in August could be seen in the history books as the beginning of a period of overshooting.
Tags: Getting Graphic