June 20

6/20 – The Fed tried to lower the hammer on inflation last week, raising the federal funds rate by 3/4 of a percentage point. Economists are expecting 3 more half-point increases this year, which would take rates from roughly zero to 2.25% in 2022. The first casualty will be the housing market. Freddie Mac said 30-year mortgage rates hit a 14-year high of 5.78% last week, up from just 3.11% in Dec 2021. Existing home prices declined for 3 straight months (Feb-Mar-Apr) with another decline expected for May. Durable goods (cars, appliances) have already taken a hit. With gas prices at $4.98 per gallon (AAA national avg), consumer spending at retail and food service might not be far behind. The Fed Bank of NY says its economic model projects an 80% chance of recession this year, and projected negative 0.6% GDP growth in 2022, followed by another 0.5% drop in 2023.