‘If You Haven’t Re-fi’d, Do So Now:’ Experts Predict Inflation, Fed Will Drive Up Rates

A new poll from Fox News shows 9 in 10 Americans are worried about inflation, and they aren’t alone. A growing consensus among housing and banking analysts is that, while the Federal Reserve gets most of the attention, the real force impacting mortgage rates in the coming months is inflation. And that’s a factor much harder for policymakers to impact than the Fed.

“If you haven’t yet refinanced, do so now,” says Greg McBride, chief financial analyst for Bankrate. “The likelihood is that we see higher rates, not lower rates in the months ahead.”

While an entire industry has grown up around ‘Fed watching’ — tracking every hint dropped by Federal Reserve Chairman Jerome Powell and his counterparts — inflation hasn’t been an issue for most Americans in decades.

Until now.

On Sunday, Treasury Secretary Janet Yellen toldCNN’s “State of the Union” she expects price increases to remain high through the first half of 2022 but insisted the current situation reflects “temporary” pain. “I don’t think we’re about to lose control of inflation,” Yellen said. “Americans haven’t seen inflation like we have experienced recently in a long time. But as we get back to normal, expect that to end.”

Many economists disagree. They argue the Federal Reserve has lost control of the inflation issue, and America is on an inevitable course of higher interest rates as a result.

A more aggressive monetary policy might be needed next year if inflation readings stay high, said Federal Reserve Gov. Chris Waller on Tuesday.

In a speech to Stanford Institute for Economic Policy Research last week,Federal Reserve Gov. Chris Waller suggested that higher interest rates may be needed if inflation trends continue.

“If monthly prints of inflation continue to run high… a more aggressive policy response than just tapering may well be warranted in 2022,” Waller said.

And Mike Fratantoni, Mortgage Bankers Association (MBA) senior vice president of research and chief economist, disputes Yellen’s claims that the current inflation is largely a function of supply-chain bottlenecks. He says the inflationary trend is not transitory and could last for the next two years. 

“We’re really pretty confident that [housing costs] are going to keep rising even after some of the things like used car prices and other things that are directly related to supply-chain constraints revert,” Fratantoni said in a recent press briefing. “Those things are going to be transitory once those supply chain issues go away. But I think the shelter price component is going to persist for a long time – like years.”