Interest Rate Forecast – Is Inflation Right Around the Corner?




Basic

In March of 2009, I wrote an article predicting where mortgage rates were heading. The name of this article is “Mortgage Rate Predictions-What the Charts Are Telling Us.” At the time I wrote this article, interest rates were 6 to 6.5%. My article got a lot of very bad reviews because many readers thought I was off my rocker for predicting mortgage interest rates would hit 4%. truly, there were many more predictions in this article which all came true. So, I’m proud of my article. Now, I will attempt to predict what will happen to interest rates in the future.

Looking at the interest rate charts, it is easy to see there is very little volatility. So, it is very doubtful an upward swing will bring about a downward swing that will improving the low interest rates we are now seeing. In other words, technically speaking, it would be difficult to see interest rates go considerably lower than they are in this interest rate cycle.

It Looks like Inflation is the Goal

Furthermore, from a basic aspect, it looks as if the Obama administration is doing everything they can to create inflation. Their refusal to let American oil companies drill for oil method there is little chance the price of crude oil will be falling. With any kind of growth in the economy, certainly, the price of oil will increase. This would be inflationary.

Also, since they have taken office, this administration has produced a large amount of debt. The national deficit in the year 2007 was under $200 billion. In the year 2008 it ballooned to over $400 billion. Though this is a large deficit, there have been larger deficits in prior years. However, the projected deficit for the year of 2010 is $1.3 trillion!

Can We Survive a $1.3 trillion deficit?

Though this number is gaudy, it wouldn’t be all that bad if this deficit produced enormous growth. However, it has not. So, the Fed is trying to deflate the dollar as a method of deflating the deficit. In other words, they are printing more dollars and using these dollars to pay off our debts. This simply method the dollars we citizens have or will have, will be worth less than they are now. This method inflation. We can only hope it won’t turn into hyperinflation.

already if it doesn’t, certainly it method interest rates will be going up very soon. How soon is anybody’s guess. However, since we are trying to pay off the deficit that is more than one 10th of our gross national product and we are trying to do so with inflated dollars, we could see interest rates go up significantly. Certainly, one would think 10% on a 30 year mortgage would not be impossible within a year’s time. I very much hope I am way off with this prediction.




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