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Half the point of raising rates like this is to signal to everyone that inflation is a priority and will be addressed, with the hope of killing off expectations
by Panzer04 4y ago
Half the point of raising rates like this is to signal to everyone that inflation is a priority and will be addressed, with the hope of killing off expectations of further inflation (which can be a feedback loop).
Ultimately none of the measures you mention are really relevant to inflation, as far as the Reserve would be concerned. CPI is.
The US probably has it the worst because they subsidise fixed 30y mortgages, which you pretty much can't get anywhere else on the planet because the terms of such are so insanely generous to the holder. These insulate a massive portion of the US population from immediate effects of rate rises, so the US likely has to hit harder than most other countries for the same effect on inflation.
- jacquesm 4y ago> they subsidise fixed 30y mortgages, which you pretty much can't get anywhere else on the planet https://www.rabobank.nl/particulieren/hypotheek/hypotheekrente https://www.rabobank.nl/particulieren/hypotheek/hypotheekren... 5.44% right now, still well below the US rates (~7%).
- deleted 4y ago[deleted]
- jdlshore 4y agoI can’t read that, but one of the unique features of the “standard” US 30-year fixed rate mortgage is that there’s no penalty for early payoff. As a result, it’s easy to refinance when rates go down, which is almost certain to occur during the 30-year period. This capability is priced in to the rate.
- fomine3 4y agoJust introduce: "Flat 50" (フラット50) is a thing in Japan