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NW Indiana | I appreciate the discussion everyone brings. With this being such interesting times I am trying to think of as many angles as I can to try to better plan for the future. So I had an interesting thought earlier- can rising interest rates actually create inflation in certain sectors? What got me thinking this was actually the housing industry. With supply at really low levels price tends to increase in order to bring more supply on the market. But with over half of mortgages locked in at below 4% fixed doesn't that take away a lot of incentive for people to sell if they have to get a new mortgage at a higher rate? The average rate for mortgages in 2021 was 2.95%, how willing will those people be to give that up to move for 6% rates? Basically I could see this making people less willing to sell. Now also factor with rates now at 6% new home building will also slow and guess what that creates less supply so what has to happen?
So will demand be slowed enough to offset it or will demand just get shifted down the price bracket? But still low supply so it makes me unsure of the outcome.
Point is I think this could be said about many sectors already fighting low supply (farmland but how much sold has a mortgage?, auto's but manufacturers typically offer cheap etc). Does this all loop back to how the 70's played out with several peaks and troughs?
Also another thought I have had is with so many of the baby boomers entering retirement does this put pressure on the labor market actually creating more wage inflation? Baby boomers are 21.5% of the population which isn't that much different then the next 3 generations but I would guess they have made up a higher portion relative to the work force(22% millennials still trying to figure out what work is and 20.35% gen Z doesn't even know how to spell the word work). Gen X being the lowest % of population of the 4 at 19.7%
Edited by IN555 4/21/2022 20:41
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Can higher interests actually create inflation?
