Russia's invasion of Ukraine and what it means for global growth could soon take a toll on the U.S. economy as it pushes inflation higher, according to the latest from Fannie Mae.
In February, the Consumer Price Index CPI, a key measure of inflation, was a new 40 year high. The Federal Reserve began at its March meeting, but said more rate hikes will likely be needed to bring it back down in order to fight inflation.
This change in the Fed's monetary policy has caused Fannie Mae's Economic and Strategic Research ESR Group to reduce its projections for economic growth in 2022, according to its March commentary. In 2022, the ESR Group projections for real GDP growth of 2.3% are lower than the previous projection of 2.8%.
If you want to take advantage of interest rates before they rise again, you can consider taking out a personal loan to help pay off high-interest debt and reduce financial stress. Other interest rates will rise as the Fed continues to raise the federal funds rate to fight inflation that rose during the COVID-19 epidemic. Fannie Mae predicted for mortgage rates this year and next, and that the average 30-year fixed-rate loan will rise to 3.8% in 2022 and 3.9% in 2023.
These annual rates are currently lower than today s interest rates, with the 30 year mortgage averaging 4.16%, according to the report from Freddie Mac.
The housing is currently acting as support to an otherwise slowing economy, but it is adding to inflation, Doug Duncan, Fannie Mae senior vice president and chief economist, said. Even as interest rates are rising and reducing affordability, demographics are strong supports for demand, and the paucity of existing home supply is supporting new construction and sales.
He said that housing may be an intermediate-term hedge against inflation because of the degree to which monetary ease is capitalized into home values indicates increased risk as rates rise, but this may be offset by some evidence that housing is an intermediate-term hedge against inflation.
If you want to take advantage of the mortgage rates now before the Fed raises rates again, you could consider refinancing your home loan to lower your monthly mortgage payments. It is possible to compare multiple mortgage lenders at once and choose the one with the best interest rate.
Fannie Mae said its economic forecast was based on several assumptions, such as a near-term resolution to the conflict between Russia and Ukraine. A change in this prediction could present new economic downside risks.
A slowing economy, decades-high inflation, expired fiscal policy, tightening monetary policy and now Russia's invasion of Ukraine are all weighing on the health of the US economy, Duncan said. We lowered our growth expectations this month by half a percentage point for 2022, but the risks remain firmly to the downside. The Federal Reserve's interruptions of the trade of energy, agriculture, and other commodities are making inflation more difficult, and putting upward pressure on inflation. Despite these challenges, the Federal ReserveFederal Reserve will raise the federal funds rate five times in 2022 and another three times in 2023, according to the ESR group. If you want to take advantage of interest rates before a potential future rate hike, you could consider refinancing your private student loans to lower your monthly payment. Email the Credible Money Expert at Money Expert credible.com and ask a question that could be answered in our Money Expert column.