For the moment, Fed Chair Jerome Powell and several Fed governors are singing “No sugar tonight” for the economy.
As The Fed sings “No sugar tonight” exemplified by the number of expected Fed rate hikes by February 2023 has grown to 10.4. Mortgage rates are now the highest since 2009, but inflation is the highest in 40 years. The result? The REAL 30-year mortgage rate is -3.25%.
REAL average hourly earnings are now a terrible -2.99% YoY thanks to the worst inflation in 40 years. REAL home prices are growing at 11.8% YoY.
Traders are betting that even with the Fed boosting its target for the federal funds rate by 2.5 percentage points this year to 3% won’t be enough to get the inflation rate back down to 2% over the next decade from around 8.5% currently.
In nominal terms, mortgage rates are seemingly trying to rise to 2007 levels (6.5%). But the gap between the 30-year mortgage rate and Fed Funds target rates is back to 2009 levels.
Talk about Fed and Fed government OVER stimulypto! Even REAL US home prices grew at 12% YoY pace while the REAL Fed Funds Target rate is -8.04%.