We're seeing inflation everywhere from the grocery store to home sales. Some say the Federal Reserve lowering interest rates is to blame as lower interest rates go along with higher prices. Did it? The answer is "mostly-but not completely" according to KTRH Money Man Pat Shinn. He says low interest rates do encourage inflation and then he takes us back to last year. "March 23rd, 2020 was the day The Fed lowered the Overnight Rate to 0%."
Low interest rates also encourage people to spend, which means higher demand bringing up prices. On the other hand, the easing of the covid lockdown also means more demand for clothing and hospitality items. Add on the post-covid supply chain setbacks adding to the demand, and you've got yourself some inflation.
Shinn says those rates are going to stay low for a while. "They don't expect to raise that Overnight Lending Rate until 2023."
Shinn says there are also other influencers involved mostly as a result of the covid lockdown.. The diminished supply of computer chips bringing on higher prices in just about everything, and the demand for new homes and home remodeling brought on by people staying at home long enough to see its flaws.
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It doesn't buy as much as it used to.Photo: Tetra images RF