CUSO-News---Payments-Report

close

Categories

More Tags

Subscribe to Email Updates

Popular Stories

MAP Network Exchange Launches in partnership with PULSE
What It Means to Have a World Class NPS
FedNow: Changing the Game for Real-Time Payments
First-Party Fraud - The Not So Friendly Fraud Reality
What Consumers Should Know About the Credit Card Competition Act
Written by Cyndie Martini
on December 21, 2021

Economists at CUNA and NAFCU expect the FED to accelerate its tapering due to faster than expected increases in inflation. The FED is currently purchasing $80 billion in bonds and $40 billion in mortgage-backed securities per month ($120 billion total). Tapering was originally set to reduce at $15 billion per month. An accelerated tapering may double that amount.

“Inflation continued to surge in November,” Dawit Kebede, a CUNA senior economist, said to cutimes.com. “Supply chain disruptions, higher demand for goods that continue to exceed pre-pandemic levels and increases in COVID-sensitive items such as shelter contributed to the rise.”

NAFCU chief economist Curt Long said to cutimes.com that he expects the FED to accelerate its tapering leading to rate hikes by the summer. “Doing so would open the door for liftoff beginning in March, with June being the most likely candidate for the next rate hike,” said Long.

There is a general view that the FED may be accelerating its tapering and rate hike programs into peak inflation. With energy prices dropping in recent weeks and supply chain disruptions expected to ease, inflation should begin coming down at the beginning of 2022.

The largest contributors to record inflation are energy and automobiles. Over the past 12 months, new vehicle prices rose by 11.1% and 31.4% for used cars and trucks.

For November, inflation rose by 0.8%, producing a year-over-year change of 6.8%. Despite the high headline number, the month-to-month rate of change is down from 0.9%, creating a slower growth rate.

Rising rates will slow the economy as credit conditions tighten. This means businesses and consumers will borrow less. Either because of higher loan rates or loan ineligibility because of stricter credit conditions. As consumer spending slows, businesses will begin laying off employees to cut costs. Such conditions can spur the beginnings of a recession.

 

Let Us Know What You Thought about this Post.

Put your Comment Below.

You may also like:

Inflation

Inflation's Sizable Impact on Credit Card Spending

The pandemic led to a decrease in credit card balances and delinquencies as consumers were flush with cash from stimulus...

Inflation

Inflation and Impact on Credit Unions

Inflation hit a high of 7% in December, which rivals numbers not seen in decades. Worse, the most recent print was 8.5%....

Inflation

Inflation Continues To Run Hot But The Consumer Shrugs It Off

Thursday's (Feb 10th) inflation print rose at 0.6% month-over-month. The expectation was for a 0.5% print. The previous ...