What will happen with inflation, interest rates and housing? Here’s what to expect in the next two years, and what could go wrong.

what will happen with inflation, interest rates and housing? here’s what to expect in the next two years, and what could go wrong.

What will happen with inflation, interest rates and housing? Here’s what to expect in the next two years, and what could go wrong.


This article is reprinted by permission from NerdWallet. The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Let’s assume the Federal Reserve knows what it’s doing.

The central bank is slowing the economy with a series of painful interest rate increases. Its goal: Reduce the current 8.3% year-over-year rise in consumer prices, bringing them down to the Fed’s 2% target.

With five such interest rate hikes under our belt this year, many of us may wonder: What’s next?

Also see: Are the rich or poor hurt more by inflation?

Brace for another year of high interest rates — and prices

Most analysts agree — and Fed Chair Jerome Powell has said as much — interest rate increases still have a long way to go. Short-term rates are currently around 3% and the Fed is targeting 4% to 4.5%, so additional rate hikes will likely continue through early 2023.

“While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said at an economic policy symposium on Aug. 26. “These are the unfortunate costs of reducing inflation.”

So when does it get better?

Here’s how things are expected to go as we wash inflation out of the economy:

Through the end of 2022

Look for two more interest rate hikes by the Fed, in November and December.

That means the cost of money for home purchases and refinances is likely to get more expensive until inflation eases. While current 30-year mortgage rates of around 6% are below the half-century average of nearly 8%, we’re not likely to see a turn much lower over the next 12 to 18 months.

You’ll also continue to see higher interest fees for carrying a balance on your credit card.

In 2023

There’s likely to be another interest rate increase next year — and at that point, the Fed may stand pat, seeing how the tighter money supply impacts the economy and, most importantly, consumer prices.

Following an extended period of solid job growth as the pandemic wanes, employment will soften. There are likely to be layoffs and corporate cutbacks. There will be less talk about “the great resignation” or “quiet quitting.”

A growing number of analysts believe the impending economic slowdown may be enough to tip the U.S. into recession.

One significant voice in the crowd sounding a recession alarm is Doug Duncan, chief economist for Fannie Mae, a government-sponsored company that fuels financing for the home mortgage market. He expects a “moderate recession beginning in the first quarter of 2023.”

See: How to save $50,000 on your mortgage, credit-card and car loans — and win the battle against inflation

In 2024

A September CNBC survey of analysts, economists and fund managers reveals that most believe that by 2024 inflation will have sunk close to the Fed’s 2% target.

If so, we’ll enjoy lower prices for groceries, consumer goods and the general cost of living. However, we’ll also likely experience higher unemployment and a sputtering economy.

Once the Fed reaches its 2% inflation goal, it will begin lowering interest rates to restimulate the economy.

Yes, lower rates.

It’s like driving your car into the middle of the desert until you run out of gas — and then hoping to find a gas (or electric) station to fuel up and restart the engine. This is how monetary policy is supposed to work.

These scenarios are based on a “just right” economic reaction to the Fed’s interest rate action. Of course, as our pandemic times prove: There are plenty of unknowns that can spoil the best-laid plans.

What could go wrong? The Fed might stall the economy with higher interest rates but consumer costs might be stuck as well — not moving lower at all. It’s called stagflation.

In other words, the Fed’s Powell would be looking to thumb a ride to his next stop.

Don’t miss: Most economists see the U.S. turning into a buyer’s housing market in 2023. Here’s where you’ll see the biggest declines in value.

What does this mean for your financial decisions?

We don’t live our lives according to a macroeconomic plan. We fall in love, have babies, buy houses and get new jobs, all at the whim of unknown forces. So the Fed will do its thing — and you should do yours.

Trying to make financial decisions under optimal circumstances is a ticket to Misery Bay, Michigan. What you can do is:

  • Don’t make an iffy financial situation worse, such as by taking on too much debt.
  • Remember that improving your financial status is an ongoing and lifelong process. Small steps yield long-term results.
  • Understand that a good idea today will be a good idea tomorrow. Rush decisions are often made under false deadlines.

More From NerdWallet

Hal M. Bundrick, CFP® writes for NerdWallet. Email: hal@nerdwallet.com. Twitter: @halmbundrick.

News Related


Fleck, Gophers have an answer for any critics

MADISON, WIS. — The past week for the Gophers was circle-the-wagons time. They endured an emotional, 13-10 loss to Iowa on Nov. 19, a defeat that ended their chances of ... Read more »

Former Rams star Odell Beckham Jr. removed from plane in Miami

MIAMI —  NFL free agent Odell Beckham Jr. was removed by police from an aircraft before takeoff at Miami International Airport after officials said he failed to respond to requests to ... Read more »

Missing Cleveland woman last seen in October found dead in Pennsylvania, shot in head: coroner

Missing Cleveland woman last seen in October found dead in Pennsylvania, shot in head: coroner WILKINSBURG, Pa. (WJW) – A Cleveland woman reported missing by city police earlier this month ... Read more »

Newark fire captain assaulted while responding to fire

Newark fire captain assaulted while responding to fire NEWARK, NJ (PIX11) — A homeless man allegedly threw a can of food at a fire captain on Sunday as the first ... Read more »

Free agent starting pitcher Mike Clevinger signs with new team

New Chicago White Sox pitcher Mike Clevinger during his time with the San Diego Padres Mike Clevinger is officially headed to a new ball club. Ken Rosenthal of The Athletic ... Read more »

Storm with high winds, colder air to blast across Midwest, Northeast

The same storm poised to trigger severe weather to parts of the southern United States from Tuesday to Wednesday will bring a blast of high winds as colder air sweeps ... Read more »

Firefly swarms may have finally solved a 20-year-old scientific mystery

Firefly swarms may have finally solved a 20-year-old scientific mystery Imagine an old-growth forest in the fading light of a summer evening. As the last of the sun’s rays disappear ... Read more »

The Old-School Rule That Allows This Veteran To Thrive In Retirement

Carol Gee Retirement Snapshot Carol is ready to teach her craft class at the Skillshare Program. Photo credit: Carol Gee Name: Carol G. Location: Atlanta, Georgia Age: 72 Retired At: ... Read more »

10 Lesser-Known Destinations In Europe That Shouldn't Be Overlooked

10 Lesser-Known Destinations In Europe That Shouldn’t Be Overlooked Europe is home to some of the world’s most popular travel destinations, but that doesn’t mean there aren’t plenty of hidden ... Read more »

Rochester man drives through fence, restaurant wall

Rochester man drives through fence, restaurant wall Editor’s Note (11/27): A previous version of this story had the incorrect date of the incident. The article has since been updated. ROCHESTER, ... Read more »

Texans’ defense bracing for dangerous, dynamic Dolphins offense

HOUSTON – In a blink, with a deep spiral heaved and a sprint behind the secondary, there’s another deep strike. Yet another touchdown pass for one of the most dynamic offenses ... Read more »

California regulators OK $1 billion for EV charging project, mostly for trucks

The California Public Utilities Commission has approved a $1-billion vehicle electrification charging project, with most of the money earmarked to accelerate the number of midsize and heavy-duty trucks on the ... Read more »

Gov. Kristi Noem suggests RNC Chair Ronna McDaniel should be replaced after midterm losses: 'I don't know a party that can continue to lose like we have and keep their jobs'

South Dakota Gov. Kristi Noem; RNC Chair Ronna McDaniel Charlie Neibergall, File/Associated Press; Alex Brandon/Associated Press South Dakota Gov. Kristi Noem said the GOP “needs to evaluate what we are ... Read more »

'Frustration' fuels Denver Broncos' sideline blowup in loss

'Frustration' fuels Denver Broncos' sideline blowup in loss CHARLOTTE, N.C. — In a season in which the only thing the Denver Broncos can consistently do, it seems, is raise their ... Read more »

Jacoby Brissett leads Browns to OT win in likely last start

Jacoby Brissett leads Browns to OT win in likely last start CLEVELAND — In what was likely his final start with the Cleveland Browns, quarterback Jacoby Brissett went out a ... Read more »

A GOP congressman says TikTok should be banned in the US and is introducing legislation to do so, calling the app 'digital fentanyl'

Rep. Mike Gallagher, R-Wisc., walks down the House steps on Friday, September 30, 2022. Bill Clark/CQ-Roll Call, Inc via Getty Images In a Fox News appearance, Wisconsin Rep. Mike Gallagher ... Read more »

Asia Markets Fall Amid Unrest in China Over Covid Restrictions

This is CNBC’s live blog covering Asia-Pacific markets. Asia-Pacific shares traded lower on Monday amid unrest in China over its continued zero-Covid policy and a growing number of cases reported ... Read more »

Fox commentator melts down over vaccinations — saying she's going to be sent to a concentration 'camp'

Photo: Screen capture Fox contributor Lisa Booth ranted on Sunday that the United States isn’t all that much better than China when it comes to taking away the freedoms of ... Read more »

Thousands without power after plane crashes into power lines in Montgomery County

Thousands without power after plane crashes into power lines in Montgomery County MONTGOMERY COUNTY, Md. (DC News Now) — Thousands across Montgomery County were left without power after a plane ... Read more »

Herschel Walker Reportedly Gets Tough Campaign News

ATHENS, GA – SEPTEMBER 11: Former running back Herschel Walker for the Georgia Bulldogs on the sidelines against the UAB Blazers in the first half at Sanford Stadium on September ... Read more »

Ronna McDaniel Criticism Grows as Kristi Noem Suggests RNC Chair Should Go

In this image, RNC Chairwoman Ronna McDaniel speaks during a press conference on November 9, 2022. South Dakota Governor Kristi Noem on Sunday suggested she would support new RNC leadership ... Read more »

Most Underrated Shows on Netflix

Netflix didn’t become the No. 1 streaming service in the world by accident. To stay on top, Netflix spends billions on original content every year. Still, many Netflix shows, like ... Read more »

Severe Weather Delays Over 2,500 Post-Thanksgiving Flights in US

At least 63 flights had been canceled and 2,564 more had been delayed shortly before noon, according to FlightAware.com Read more »

Severe weather 'outbreak' to impact South, threatening 25M from Texas to Illinois

A massive storm system moving into the Pacific Northwest on Sunday is predicted to bring severe weather ranging from strong winds and rain to a few tornadoes in the South, meteorologists ... Read more »

4 fun ways to use natural garlands this Holiday season

HOUSTON – It’s time to say yes to fresh garlands! Kim Czuppon and Jessica Malpass, co-owners of Forget-Me-Not Pots, showed us different styles for home décor and simple ways to ... Read more »

'Dangerous precedent': Why constitutional experts are up in arms over move supported by Government

A group of leading constitutional experts have written an open letter urging the Government to rethink its support for an amendment to the Three Waters legislation. The amendment would add ... Read more »

Video: Amari Cooper Had Worst Drop Of The NFL Season Today

CLEVELAND, OHIO – SEPTEMBER 22: Amari Cooper #2 of the Cleveland Browns makes a catch during the fourth quarter against the Pittsburgh Steelers at FirstEnergy Stadium on September 22, 2022 ... Read more »

10 Most Reliable Compact SUVs Of 2022

10 Most Reliable Compact SUVs Of 2022 Compact SUVs are the most popular vehicles in the world, as they are both cost-effective and practical, with plenty of luggage capacity and ... Read more »

Shake ‘n Bake makes major change to its iconic ‘shakeable’ packaging: ‘It’s an adjustment [we’re] happy to make’

Shake ‘n Bake delicious dinner In a step to reduce plastic waste, Shake ‘N Bake is shaking up its packaging with the removal of the iconic “shaker” bag. The packaging ... Read more »

Widow of man killed in Southcenter parking garage seeks accountability

Widow of man killed in Southcenter parking garage seeks accountability Mary Wesolowicz said she and her husband Chris had gone to Westfield Southcenter mall for dinner many times. But as ... Read more »

Former Royal Butler Reveals What Amazed Him About King Charles’ Infamous Pen Incident

Just a few days into his reign as Britain’s new monarch, King Charles III was making headlines for a reason he probably wished he hadn’t when he was seen on ... Read more »

Friendly Fire: Rams coach Sean McVay takes a shot to jaw from his own player

Friendly Fire: Rams coach Sean McVay takes a shot to jaw from his own player Seattle’s division rival, the Los Angeles Rams are in Kansas City to take on the ... Read more »

Penn State breaks top 10 in AP poll

Penn State breaks top 10 in AP poll The Associated Press released their Top 25 college football teams Sunday, with Penn State moving up in the rankings. This week, they ... Read more »

RUMOR: Barcelona legend Sergio Busquets joining Inter Miami amid Lionel Messi links

11-27-22 David Beckham and Inter Miami are in hot pursuit of PSG and Argentina superstar Lionel Messi, hoping to lure him to the MLS in June of 2023. The club ... Read more »

Sean McVay takes nasty hit to the head after being blindsided by Rams player running onto field

KANSAS CITY, MISSOURI – NOVEMBER 27: Head coach Sean McVay of the Los Angeles Rams reacts before a game against the Kansas City Chiefs at Arrowhead Stadium on November 27, ... Read more »

Police Seek Hit-and-Run Driver Who Struck Elderly Pedestrian in South Chicago

Chicago police are looking to find the driver who struck an elderly person and then sped away Saturday in the South Chicago neighborhood, authorities said. The crash was reported at ... Read more »

Albert Pyun, cult filmmaker behind ‘Cyborg’ and ‘Sword and the Sorcerer,’ dies at 69

Albert Pyun, a genre filmmaker known for cult classics such as “The Sword and the Sorcerer” and “Cyborg,” has died. He was 69. The prolific writer-director died Saturday evening, according ... Read more »

Watch: Rams pull off fake punt vs. Chiefs

Watch: Rams pull off fake punt vs. Chiefs Johnny Hekker may not be on the Rams anymore, but their new punter sure can sling it, too. On Sunday against the ... Read more »

Bush-Era DHS Secretary Rips GOP Plan to Impeach Mayorkas: 'Political Stunt'

Above, Former Department of Homeland Security Secretary Michael Chertoff speaks during an event to mark the 15th anniversary of the Department of Homeland Security, March 1, 2018 in Washington, DC. ... Read more »

Wisconsin brings in Cincinnati's Luke Fickell as coach

Wisconsin brings in Cincinnati's Luke Fickell as coach Wisconsin has hired Luke Fickell as its next football coach, athletic director Chris McIntosh announced Sunday. Fickell led Cincinnati to the College Football ... Read more »
Breaking thailand news, thai news, thailand news Verified News Story Network