Upward pressure on interest rates this morning is being mitigated by falling stock prices–just like in simpler times when stock and bond prices would move inverse to one another. The NASDAQ is retreating off of Friday’s all-time-high and other indices are falling suit. The last FOMC meeting of the year kicks off tomorrow. There is a 0% chance of a rate hike being announced tomorrow, but I believe they will announce three rate hikes in 2022.
Historically, when the Fed hikes the overnight rate, longer-term rates rise as well. However, with many corporations and individuals being overleveraged as a result of virtually interest free money being lent these last few years, the prospect of higher carrying costs may actually repress stock prices and send mortgage rates lower.
The Fed has a lot of stimulus to unwind and must do so without unraveling the entire economic system. Thank goodness these folks are smart 🙂