Interest rates continue to steadily advance. The benchmark 10-year U.S. Treasury yield was at 2.75% this morning. Pushing interest rates higher are concerns that rising inflation and the Federal Reserve’s plans to aggressively tighten monetary policy could slow economic growth.
The effects of rising interest rates are beginning to show. For example, last week mortgage demand fell more than 40% from a year ago as rates ticked higher. The average 30-year conforming fixed-rate mortgage rate is now 5.25% for loans with a 20% down payment.
Part and parcel to rising interest rates is the high, persistent inflation we are experiencing. This month marks a year since the annual rate of inflation (as measured by the U.S. Consumer Price Index for All Urban Consumers) has been above 4%. The past six months of CPI readings have each been above 6%. In fact, the figure for February 2022 released last month was 7.9%.
The March 2022 CPI number will be released tomorrow. Analysts at investment bank UBS estimate a headline CPI reading of 8.5%, which would be the highest since December 1981. However, they forecast that March might be the peak in this cycle and that inflation could stair-step down from here. We hope for such a reprieve, but we make no confirming prediction.
Interest rates have a multitude of implications on personal financial plans. Planning around loans and debt, navigating bond investments, and investing to meet or beat inflation are three such topics. We would be glad to discuss these things however they might relate to your situation and goals.