US Economy Transforms into Higher-Rate World

The US economy has undergone a significant transformation that is driving interest rates higher. The era of low-cost borrowing is over, and a new world of higher-priced loans is taking its place.

According to Joe Brusuelas, chief economist at RSM, the shift is due to a structural transformation of the economy. Consumer and business spending are healthy, but supply shocks and bottlenecks are causing inflation to persist. This has led to higher oil and gas prices, as well as shortages in computer chips and electronic equipment.

The average 30-year mortgage rate has reached 6.95%, the highest in over a year and a half. The Federal Reserve's benchmark interest rate hike is not the main driver of this trend, but rather broader economic trends. Analysts say that even if the Fed holds rates steady, higher borrowing costs are still likely.