In some ways, mortgage rates are a reflection of the overall health of the American economy. As we can see in the chart below from "FreddieMac", often both mortgage rates and inflation rates peak during recessions and tend to fall or are stable during better times. How has inflation impacted mortgage rates recently? The FED Rate According to the St. Louis FED website: "The federal funds rate is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with … [Read more...]
Annual Inflation Since 1914
The Bureau of Labor Statistics has been tracking the Consumer Price Index (CPI-U) since 1913. Thus they have been able to calculate the Inflation rate since 1914. And over that period we have seen some major periods of both inflation and deflation as you can see from the chart. The early years (the teens) were marked by high inflation. The early 1920's started with deflation and low inflation. The 1930's of course had the Great Depression and was primarily a period of deflation. World War II ushered in times of massive government spending and nationwide austerity as commodities were rationed and most of the production was directed toward the war effort. As the G.I.s returned and wanted to … [Read more...]
