Are we headed for double-digit inflation and crazy interest rates?

Lòrdèss Mãggìë II

12 min

Business & Finance

Description

The wild ride on the markets and economy continues, with the Treasury dropping 16 basis points and the Ten-year falling 32 bps from Nov. 23. This volatility is expected to continue into the foreseeable future, and nothing seems to be slowing it down. Thirty Capital CEO Rob Finlay points out the diverse forces tearing at the economy - Omicron and inflation, noting this makes it especially tough for policy makers. “High inflation and some really crazy rates” could happen, points out Rob, comparing it to Paul Volcker’s time as Chair of The Fed in the late 1970s. <h1>Very real expectation of quick taper and rate increases</h1> With a very real expectation of a quick taper and quick rate increases, three-year shorter term swaps moved up last week, contrary to long-term rates. The yield curve is flattening. Senior Analyst Jay Saunders observes: “Interestingly enough, the Fed Fund futures don't show a tremendous increase or pull forward in the Fed movement. The first Fed rate hike is being priced in around June of 2022. The December Futures show two plus rate hikes in 2022. So it hasn’t changed a ton.” <h1>But will rates increase?</h1> However, Jay believes that rates may not necessarily increase. He says that the market always acts aggressively when there is a hint of an increase, with something coming along to keep rates down. Most recently, this has been the Omicron variant. The market has its own way of demanding policy changes, which of course don’t always happen. <h1>How flattening of the curve affects CRE borrowers</h1> For some commercial real estate borrowers, there could be tough question

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