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Inflation will continue to rise in 2022 and will peak at around 7% in the first quarter of the year, before gradually decreasing to 3.8% by the end of the year, forecast Fannie Mae. The mortgage giant’s Economic and Strategic Research (ESR) group said inflation is one of the biggest economic risks of the year. December 2021 commentary,

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The forecast came before the most recent consumer price index (CPI) – a measure of inflation – which rose 7% annually In December, the highest level of growth since June 1982. on one Annual Growth Rate 4.8%, have been unable to keep wages between a struggling labor market,

“While the economy picked up steam late in the year, unfortunately, so did inflation, and markets expect the Fed to reorganize its monetary policy as a result,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist. “The public voiced their ill-will towards inflation in our most recent National Housing Survey, which found that 70% of consumers believe the economy is on the wrong track – the highest since 2011, when consumer sentiment was measured. It was weighed down after the Great Recession.”

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Federal Reserve preparing to raise interest rates

The ESR Group predicts that as inflation rises, the Federal Open Market Committee (FOMC) will begin to tighten its monetary policy more aggressively. Fannie Mae expects the Fed to raise interest rates in the second and fourth quarters of 2022, and again in each quarter of 2023. a chance third rate hike It continues to grow this year as well.

Duncan said, “The Fed has recently acknowledged that inflation is unlikely to be temporary, and will now attempt to engineer a soft landing, in which inflation slows down to acceptable levels and economic growth slows.” But the contract doesn’t happen.” “Whether the Fed is able to thread this historically difficult policy needle is shaping up to be one of the most consequential economic stories of 2022.”

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High mortgage rates could disrupt home sales in 2022

Home sales are expected to decline by 1.4% this year as mortgage rates continue to rise following a surge in home sales in late 2021. Fannie Mae expects mortgage rates to average 3.2% in the coming year as home prices continue to rise.

According to ESR Group, the tightening of the Fed’s monetary policy to tackle inflation, along with supply crunch and appreciation of domestic prices, could slow domestic sales activity. Currently, the average 30-year fixed-rate mortgage is rising slightly and sitting at just over 3% as the Omicron variant of the coronavirus is expected to ease and economic growth continues, according to the latest data From Freddie Mac.

If you want to take advantage of today’s low interest rates, Get in touch with a trusted Home Loan expert to talk to And, Get Your Questions Answered.

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