Federal Reserve Rate Hike Marks End of Low-Interest-Rate Era
The Federal Reserve's latest interest rate hike is a reflection of the shifting economic landscape. For nearly 15 years after the Great Recession, the US experienced a low-interest-rate, low-inflation world. However, this era has come to an end as steady economic growth and stubbornly high inflation take center stage.
According to Joe Brusuelas, chief economist at RSM, the pre-pandemic economy is no longer relevant. The current economy is characterized by healthy consumer and business spending colliding with supply shocks and bottlenecks. Higher oil and gas prices due to the Iran war, as well as the AI buildout's struggles with insufficient computer chips, electronic equipment, and workers, are contributing factors.
The average 30-year mortgage rate has reached 6.95%, its highest in over a year and a half. This is a significant increase from the low rates seen during the 2010s and even lower during COVID-19. Big tech firms are borrowing massive amounts of cash to fund data center construction, while the federal government continues to run large yearly budget deficits.