Will Inflation Continue?

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Will Inflation Continue?


The question of inflation is a tricky one for several reasons, perhaps the biggest being that the Fed is in damage control mode.  They're playing catch up in reckoning with their ignorance and incorrect actions based on their belief that the inflation we're knee-deep in would be "transitory" in 2021.  We've seen that inflation is not only not transitory, but that it's spiraled to a point where it's tough to reign in.  Last Friday, mortgage rates shot up nearly .5 percent based on updated inflation readings - the inflation reports weren't terrible when compared with the month before, but the fact that despite Fed actions and the rosy picture the white house has painted, the numbers aren't going down.

This week, the Fed is meeting and will announce another rate decision for the Fed funds rate (remember, the Fed funds rate does NOT directly impact mortgage rates, and often has an inverse relationship, being that when the Fed raises their rate, it often brings mortgage rates down).  The expectation is for a .5 increase to the Fed funds rate.  After last week's surprisingly high inflation numbers, though, some whispers are being heard that a more aggressive .75 hike may be in store.  That would be a huge hike, and if it happens, it'll show exactly how big a problem the Fed really feels inflation is.  

As for a crystal ball, there are a lot of opinions, but I thought I'd share one that came from Ameriprise, who I do some work with.  If you need a financial advisor recommendation, Allen Weidman works with people around the country and does a phenomenal job - he provided this commentary from Ameriprise, and it gives some good insight as to what's happening, as well as what can be expected going forward.

This week will be a big one for inflation.  My crystal ball shows things getting a little worse before they get better, but that we're near peak inflation and peak mortgage rates.  When rates spiked above 5,  I predicted they'd hit a ceiling in the low 6's - we're there now, and hopefully that's as high as things will get.  As for other questions, Ameriprise's economists did a solid job covering the topic, so you can read more by clicking here

Posted by

John Meussner
NMLS ID #138061

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Comments (12)

Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Hi John - I liked listening to you and everyone else on today's Zoom call.

Jun 14, 2022 12:46 PM
John Meussner

Thanks Grant!

Jun 15, 2022 11:31 AM
Nick Vandekar, 610-203-4543
Realty ONE Group Advocates 484-237-2055 - Downingtown, PA
Selling the Main Line & Chester County

I remember studying economics in high school and how hard inflation was then to reign in. In those days interest rates were 18-19%. Americans have never realized how high prices for gasoline is in other countries. When I came here from the UK gas was 99cents a gallon, way lower than the several dollars a gallon we were used to in the UK. Europe likewise taxes gasoline very highly and I am not sure how they are all handling this crisis right now as it is making everything more expensive.

Jun 14, 2022 12:53 PM
John Meussner

The price of gas should be pretty low considering we have the ability to be energy independent, should politicians decide to go that route.  

Jun 15, 2022 11:32 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

John I don't see anyway we will avoid economic conditions getting worse, UNLESS the present administration changes the direction they have been going in on their energy policy, and I DON'T think they will do that.

Jun 14, 2022 01:02 PM
John Meussner

I don't think so either, they're dug in on their platform, which will hopefully cause a HUGE change come voting time.   It's an election cycle where people need to realize economics and the viability of our nation is more important than people getting their feelings hurt by a tweet.

Jun 15, 2022 11:33 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good evening John,

Great post and also enjoyed your input in today's Zoom meeting. I have to agree with George Souto  our current administration is just not listening to what our country needs..its sure not free daycare and free college! That won't help buy gas and groceries that have skyrocketed!

Jun 14, 2022 05:22 PM
John Meussner

Thank you, Dorie - couldn't agree more!

Jun 15, 2022 11:33 AM
Paddy Deighan MBA JD PhD
http://www.medicalandspaconsulting.com - Vail, CO
Paddy Deighan J.D. Ph.D

Inflation and recession are likely in the future and i like the terms for the new pricing based upon smaller sizes...I purchased a Red Bull and was shocked at how small it was (and expensive) 

Jun 14, 2022 11:29 PM
John Meussner

That may be a good thing, it likely only has 10 days worth of sugar in it now : p   But yes, the packaging reductions are pretty shameful for companies still reaping large profits.

Jun 15, 2022 11:33 AM
Michael Jacobs
Pasadena, CA
Pasadena And Southern California 818.516.4393

Hello John - tricky times continue. . .    Thank you for the perspective.  

Jun 15, 2022 04:00 AM
Eileen Burns 954.483.3912
Trans State Commercial Realty Inc. - Fort Lauderdale, FL
FLorida Real Estate Connector

Thanks for your participation on yesterday's zoom call.  John Meussner I do love the crystal ball approach...economics 101.  Supply and demand rule.  Another cycle to overcome with lack of leadership in the USA.

Jun 15, 2022 08:42 AM
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning John. Inflation can be a friend and a formidable foe. We are in the foe situation currently and things will get worse before they get better. Enjoy your day.

Jun 18, 2022 05:01 AM
Leanne Smith
Dirt Road Real Estate - Golden Valley, AZ
The Grit and Gratitude Agent

Good morning John Meussner From my high school class and living through the last high inflation period, the continued spending by the Feds is counter productive to the Feds increasing interest rates. However given what I have read, this appears to be more by design.

Jun 18, 2022 07:21 AM
John Meussner

If it's by design, it's evil - inflation is a tax that hits the poor the hardest, and a room full of idiots (the Fed) is deciding how many people they're comfortable having unemployed ---- I've always believed that there are far more stupid people than evil people out there, though. : )

Jun 21, 2022 08:12 AM
Anna "Banana" Kruchten
HomeSmart Real Estate - Phoenix, AZ

Hi John time will tell now won't it!  I do know we've made some adjustments to stop the bleeding and make it work for us dollar wise. What I see is that inflation is going higher as will interest rates with rate hikes expected for awhile now. And we many already by in a recession - we'll see. Government needs to stop the reckless spending and get things back under control in so many areas I won't even go into it here.

Jun 18, 2022 09:55 AM
John Meussner

Yep, I'm with you, Anna!  It's a mess, the next couple months will be rocky but should shake out by the fall

Jun 21, 2022 08:12 AM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi John:

I missed this the first time around. But it was interesting to read your thoughtful analysis after seeing what the Feds ended up doing.


Jun 19, 2022 05:34 PM
John Meussner

Thanks Jeff!

Jun 21, 2022 08:18 AM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Washington is pushing for us to be a solar powered economy and failed to recognize that there is no way to power an 18-wheeler and the loads they have to haul with electricity

Jun 20, 2022 12:10 PM
John Meussner

CA wants 100% of vehicles to be EV, meanwhile they can't power our homes to keep our AC on when it's 100 degrees in the summertime.  We need to vote them allllllll out.

Jun 21, 2022 08:18 AM