fat_lazy_union, where did you get a sense that ppl in this blog wish to have interest rate going up forever? That is not the point. As SD Realtor has mentioned in the earlier communication, too high the interest rate would have a negative effect on every level of the economy. People are just saying that having a increase in interest rate will help correct the housing market and make it more affordable.
I didn't say that people on this blog want interest rates to go up forever.
Some people on this blog seem to want interest rates to go up for awhile, enough for home prices to come down so that they could buy, and then somehow expect interest rates to be flat after they purchase or even go down, meanwhile having inflation stay flat because they feel their sideline money while be able to purchase a lot of home.
My point: the expectation for interest rates to go up to allow home prices to depress for someone to buy, and then have interest rates remain flat and or fall is wishful thinking, all this without their purchasing power of their dollars in that 5-5.5% money remain the same is wishful thinking. Intereest rates are going to move up for a long time. And inflation is going to quickly devalue all those savings earning 5-5.5%.
Let's talk about what inflation people REALLY see. And It's only going to get worse.
WASHINGTON (AP) — Consumer prices shot up at the fastest pace in 20 months in May, fueled by a surge in gas prices, although inflation pressures were moderate in most other areas.
The Labor Department reported that its closely watched Consumer Price Index registered a 0.7 percent increase last month, the biggest advance since Hurricane Katrina shut down Gulf Coast oil production in the fall of 2005. Outside of the volatile energy and food categories, inflation rose by a much more modest 0.1 percent. That was slightly lower than the 0.2 percent which had been expected and provided reassurance that this year's surge in energy costs has not spread to other parts of the economy.
Meanwhile, the Federal Reserve reported that industrial production was flat in May after a 0.4 percent surge in April. The slowdown in May had been expected. While factory output and mining, which includes oil drilling, both posted increases, those gains were offset by a 1.3 percent plunge in output by the nation's utilities. This reflected a return to milder weather after a colder-than-normal April.
Financial markets have been roiled in recent weeks by global inflation concerns. The yield on the benchmark 10-year Treasury security hit a five-year high earlier this week causing a steep dive in stock prices. Investors were worried that rising interest rates could prolong the troubles in the slumping housing market.
However, stocks have rebounded in the past two days as bond yields have edged down a bit. While investors have abandoned hopes that the Federal Reserve might cut interest rates this year, they are becoming more confident that moderate inflationary pressures will keep the central bank from raising the short-term rates that it controls.
In other economic news, the Commerce Department reported that the deficit in the current account, the broadest measure of foreign trade, increased to $192.6 billion in the January-to-March period, compared to $187.9 billion in the fourth quarter. The increase reflected a higher foreign oil bill. It was slightly below what analysts had been expecting.
The 0.7 percent overall increase in consumer prices was in line with expectations. It followed gains of 0.4 percent in April and 0.6 percent in March.
The increases in overall inflation have cut into consumers' buying power. The weekly earnings of nonsupervisory workers fell by 0.2 percent in May, after adjusting for inflation, the fourth decline this year.
So far this year, consumer prices have been rising at an annual rate of 5.5 percent, double the 2.5 percent increase for all of 2006. The acceleration has occurred because of the surge in energy costs and increases in food costs that have been caused in part by higher demand for ethanol fuel, which is produced with corn.
Excluding food and energy, core inflation is up at an annual rate of 2.1 percent through May, a better showing than the 2.6 percent rise for all of 2006.
It is the core figure that officials at the Federal Reserve follow closely. They pushed interest rates that they control up for two years in an effort to slow the economy enough to keep inflation under control. The last Fed rate hike occurred a year ago and many economists believe the central bank will remain on hold through the rest of this year, watching to see if core inflation moderates back to a comfort zone of 1 percent to 2 percent.
For May, energy prices rose by 5.4 percent, driven higher by a 10.5 percent jump in gasoline pump prices. The surge in gasoline costs appears to be moderating with the nationwide average falling by 7 cents in the past three weeks to $3.11 per gallon, according to the Lundberg Survey. That was still 95 cents higher than at the start of the year.
Food costs were up 0.3 percent in May as vegetable prices fell while beef, poultry and fresh fruit prices were up.
Outside of food and energy, the cost of new cars fell by 0.2 percent while the cost of airline fares was down 0.6 percent and clothing costs dropped by 0.3 percent.
