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Inflation Pressures
Written by Steve | Published: |
Big headlines today about inflation.
Many were speculating that inflation would decrease because the Fed has been trying to raise rates and threaten quantitative tightening to fight inflation.
But the Fed has been slow to curb this issue after the printing of trillions during the pandemic shut downs.
Next week the Fed meets again and is expected to raise interest rates again around 50 basis points, or 0.5%. However, what the market is looking to see is how ‘hawkish’ will the Federal reserve be to tighten their balance sheet and how high do they see rates going?
So besides at the gas pump and normal purchases how could this rising inflation affect you personally.
Here are a few bullets:
Cost of goods increase
You get less for your dollar, look up ‘shrinkflation’ where consumer product size shrinks for the same price. For example instead of a true ½ gallon of ice cream now it’s ⅓ for the same price
Bonds devalue with inflation. To keep up with inflation bonds have to move to higher coupon rates thus making the previously issued bonds worth less than the new bonds.
Mortgage back securities push up coupons as well making interest rates increase for borrowers
Rise in interest rates will cool off real estate market growth and values
Increased bond expense and interest rate expense will affect the stock market companies ability to borrow and lower their bottom line i.e. earnings per share pushing the market down
Cash in the bank is not holding value $100k this year will only have the buying power of ~$92k next year.
The list goes on.
I’m not a doomsday-ist. I think we will figure this out. But how you navigate through this financial chaos is vitally important to your financial well being.
Our goal has always been to help good families stay financially strong so they can thrive and give back to others.
Families that teach their children to be honest, hard working, full of faith and love and want what’s best for the next generation.
It is these types of families that are the fabric to the great place we get to live.
If you and/or any of your family members need help navigating through this storm. Reach out and let us know how we can help.
