Why WON'T the Fed raising interest rates sink the stock market?

[Edubb20]

Any of you have this take, why?

[daverobev]

Devil's advocate reasons - because I feel the especially headline stocks are high and increasing rates will cause those that make up a big chunk of the S&P to drop, so I think a 20% correction over the next couple of years not unlikely. But who knows. So reasons it won't tank/correct:

1. It's already priced in - everyone knows it's coming

2. TINA - where else are you going to put your money?

3. Certain of the high multiple companies can actually convert from growth to value - eg Amazon, once it kills all the competition it can charge what it wants and stop innovating

I was looking at a chart, I think it must've been some US treasury one, and... basically rates have been falling almost nonstop for 40+ years. That's crazy. That changing is going to make things look very different I think. Like... house prices always go up? No historically they have tracked inflation... could be in for a hefty change. Presumably most women who wanted to be in the workforce have done that. So all sorts of things that were slow-ish, one-off-ish might've finished.

May you live in interesting times, ha.

[YttriumNitrate]

I think it all depends on how much the Fed raises interest rates. If they keep it to 2.5% or under, we'll still be near historic lows. Going up to 5% would take some getting used to. Getting back up to 10% would sink the stock market.

[waltworks]

The answer, as always, is that the world isn't predictable like that. Don't get me wrong, I think we're overdue for a correction or even a crash. But I've felt that way for at least 5 years, so I'm glad I have an IPS that says not to trust my pattern-obsessed primitive brain that values losses twice as much as gains.

-W

[windytrail]

The companies on which the stock market is based will, on average, continue to make profits. Therefore, the stock market will go up.

[clifp]

I think "the market has already priced it int" and, "there is no where else to invest" are both good reasons, while the market will shrug off yet another warning sign.

My 3rd reasons, is that at least one of these two statements is true.

A. Central Bankers have become a lot better at using monetary policy, to dampen the business cycle swings and keep the economy growing steadily, since 2008

B. People believe A is true.

I will say since there are tens of trillions of stock market gains, it's very expensive to doubt the Fed's/central banks ability to handle things.  So I'm quite confident, that the vast majority of money people will publically say B is true, but it is also possible so is A.

Regarding interest rates. A number of years ago, I read a scholarly paper by some economists on the historical interest rates and default rates of sovereign debt. Going back from roughly 1400, they determined that the historical interest rate on long-term (10+ years) was about 5%. They also found that countries, that haven't default on their sovereign debt are the exception. (The US, most commonwealth country, Switzerland (kinda of), and few of the newer democracies haven't.  But, most of Europe, UK, pretty much all of Latin America and Africa, and much of Asia have at various times defaulted. They count a default as dramatic devaluation or hyperinflation.

If you think about it,  5% is a pretty reasonable risk-free interest rate, you double your money every 15 years, it more than historical inflation of 2-3%. Endowments, are supposed to distribute 5% of their assets. We all talk about the 4% SWR (which  includes an inflation adjustment).

Why anyone would want to loan Uncle Sam money for 10 year at 1.8%, much less loan me money for a 15 year for a house at 1.875%, or Uncle Sam for 30 years for 2.07%, makes no sense.  I've heard of Europeans get <1% 15-20 years mortgages, which is just crazy.  But since, much of this debt ends up the balance sheet of central bank, it is pretty much ignored

[ChpBstrd]

Here's a good explanation.

https://seekingalpha.com/article/4435781-fed-watch-ignore-the-dot-plots#comment-91381199

TL;DR version:
The feds have a really poor track record of predicting their own future interest rate increases. Also, people who lived through the 70's and 80's as adults (e.g. the Federal Reserve Board of Governors) have been much worse about overestimating inflation.

Also remember, this time last year households were getting both their 2020 and 2021 child tax credit refunds. This year they will receive neither, and that's going to come as a shock when people do their taxes this year and there's no refund. Less money to spend = less inflation.

[PDXTabs]

Here's a good explanation.

https://seekingalpha.com/article/4435781-fed-watch-ignore-the-dot-plots#comment-91381199

TL;DR version:
The feds have a really poor track record of predicting their own future interest rate increases. Also, people who lived through the 70's and 80's as adults (e.g. the Federal Reserve Board of Governors) have been much worse about overestimating inflation.

Also remember, this time last year households were getting both their 2020 and 2021 child tax credit refunds. This year they will receive neither, and that's going to come as a shock when people do their taxes this year and there's no refund. Less money to spend = less inflation.

This is the best hypothesis I've seen so far as to why inflation might get tamed soon without jacking up interest rates to their historic norms.

[HeadedWest2029]

Because stocks have held up relatively well during past hiking cycles.  Of course if the general public convinces themselves that the stock market must crash because rates are rising, it might be self-fulfilling.

https://awealthofcommonsense.com/2022/01/how-do-stocks-perform-when-the-fed-raises-rates/

[js82]

Here's a good explanation.

https://seekingalpha.com/article/4435781-fed-watch-ignore-the-dot-plots#comment-91381199

TL;DR version:
The feds have a really poor track record of predicting their own future interest rate increases. Also, people who lived through the 70's and 80's as adults (e.g. the Federal Reserve Board of Governors) have been much worse about overestimating inflation.

Also remember, this time last year households were getting both their 2020 and 2021 child tax credit refunds. This year they will receive neither, and that's going to come as a shock when people do their taxes this year and there's no refund. Less money to spend = less inflation.

This is the best hypothesis I've seen so far as to why inflation might get tamed soon without jacking up interest rates to their historic norms.

I think the two biggest components of inflation will begin coming down.

The first is, as mentioned - the absence of stimulus.  We provided enough stimulus to prevent the economy from crashing, but we went beyond that, and the result was people with bigger bank accounts spending some of their newfound money.

The second - supply chains.  Covid-related disruptions broke supply chains, and they're still broken.  It'll probably take another year or two for them to fully rebalance themselves, but this component of inflation should also start to taper a bit in 2022.

We still need to bump interest rates a bit.  0% interest rates massively skew the economy in favor of people who can get large loans.  But there's still a large transient component to this inflation - it's just taking longer to work itself out than people would like.

[MustacheAndaHalf]

...
Also remember, this time last year households were getting both their 2020 and 2021 child tax credit refunds. This year they will receive neither, and that's going to come as a shock when people do their taxes this year and there's no refund. Less money to spend = less inflation.

According to this article, the money was received on the 15th of every month.  Estimating 2 children per household, that's about $22 billion/month.  Most of that money was spent on needs, so it's impact might be in a specific part of the economy.
https://www.marketplace.org/2022/01/14/families-begin-new-year-without-child-tax-credit-payments/

The Fed's bond buying was $120 billion/month, but they have begun to "taper" and will hit $0/month sometime later this year.  They might even reverse direction, and start selling that much per month - which would make money harder to borrow.  And they'll be raising rates some number of times this year.

[MustacheAndaHalf]

The second - supply chains.  Covid-related disruptions broke supply chains, and they're still broken.  It'll probably take another year or two for them to fully rebalance themselves, but this component of inflation should also start to taper a bit in 2022.

We still need to bump interest rates a bit.  0% interest rates massively skew the economy in favor of people who can get large loans.  But there's still a large transient component to this inflation - it's just taking longer to work itself out than people would like.

I can't find an article, but I thought the Fed projects inflation to subside by the second half of 2022.  But they were wrong about how long inflation would last in 2021, calling it "transitory" for most of the year.  I suspect they're wrong again, and it will last a bit longer.

Markets expect 4 rate hikes this year, which I believe are 0.25% each, or 1.0% in total.  Currently inflation is about 7%.  So right now, the Fed is far behind inflation, and the question is how long inflation will stay high - or how long the Fed will delay rate hikes.

[goodmoneygoodlife]

Marketing pricing already has the crash baked in. So don't even worry.

[cool7hand]

Here's a good explanation.

https://seekingalpha.com/article/4435781-fed-watch-ignore-the-dot-plots#comment-91381199

TL;DR version:
The feds have a really poor track record of predicting their own future interest rate increases. Also, people who lived through the 70's and 80's as adults (e.g. the Federal Reserve Board of Governors) have been much worse about overestimating inflation.

Also remember, this time last year households were getting both their 2020 and 2021 child tax credit refunds. This year they will receive neither, and that's going to come as a shock when people do their taxes this year and there's no refund. Less money to spend = less inflation.

Very helpful. Thanks for sharing!

[js82]

The second - supply chains.  Covid-related disruptions broke supply chains, and they're still broken.  It'll probably take another year or two for them to fully rebalance themselves, but this component of inflation should also start to taper a bit in 2022.

We still need to bump interest rates a bit.  0% interest rates massively skew the economy in favor of people who can get large loans.  But there's still a large transient component to this inflation - it's just taking longer to work itself out than people would like.

I can't find an article, but I thought the Fed projects inflation to subside by the second half of 2022.  But they were wrong about how long inflation would last in 2021, calling it "transitory" for most of the year.  I suspect they're wrong again, and it will last a bit longer.

My current experience says that you're right.

I work for a company that makes things.  Our ability to make more things is currently hampered because our suppliers that build equipment for us, can't build things as fast as they would like to, because *their* suppliers are the bottleneck.  Given that it's not just manufacturers, but manufacturers' suppliers' suppliers that are the bottleneck, it's going to take longer than some people think.

It's definitely going to take more than 6 months to unwind, at least from where I stand.

[waltworks]

One of the major suppliers for my business has more inventory in physical existence than they EVER have in the ~30 year history of the company.

But... they can't get it into my hands, because the stuff is stuck in containers under 30 other containers, or in warehouses waiting to go into a container, etc. They can track the parts and containers and in some cases the stuff is literally sitting a few miles away, but it's not possible to access it.

When the backlog finally clears, there will be a hell of a supply whiplash effect, I'm guessing. Everything will suddenly be on sale. We'll go from inflation to deflation in like 2 months.

When that actually happens is anyone's guess, of course.

-W

[ChpBstrd]

When the backlog finally clears, there will be a hell of a supply whiplash effect, I'm guessing. Everything will suddenly be on sale. We'll go from inflation to deflation in like 2 months.

My household has delayed a lot of purchases because we want to stay out of stores during the omicron surge, which is 3-4x the size of the delta surge in our area, but I think we're very much in the minority judging by the parking lots. People have just stopped caring. They're walking into WalMart or Golden Corral maskless and they want gratification NOW.

I'm guessing the child tax credit thing will reel a lot of them in. Hopefully you're right about the future sales.

[MustacheAndaHalf]

One of the major suppliers for my business has more inventory in physical existence than they EVER have in the ~30 year history of the company.

It's not just your company - many companies using "just in time" approaches got burned by supply chain problems.  CNBC had an analyst on who made sense - they saw many companies refilling inventory in 2021 Q4, which they won't need to do again this quarter.

I'm guessing the child tax credit thing will reel a lot of them in. Hopefully you're right about the future sales.

Do you mean they're spending the December tax credit?  I read that those $300/child checks have stopped as of Jan 2022.

[vand]

One of the major suppliers for my business has more inventory in physical existence than they EVER have in the ~30 year history of the company.

But... they can't get it into my hands, because the stuff is stuck in containers under 30 other containers, or in warehouses waiting to go into a container, etc. They can track the parts and containers and in some cases the stuff is literally sitting a few miles away, but it's not possible to access it.

When the backlog finally clears, there will be a hell of a supply whiplash effect, I'm guessing. Everything will suddenly be on sale. We'll go from inflation to deflation in like 2 months.

When that actually happens is anyone's guess, of course.

-W

Or the opposite is happening. Suppliers tend to stockpile more inventory in an inflationary environment because its cheaper for them to buy it today and then store it than it is to buy in the just in time model that works well in a low inflation environment.

On a fundamental level, why should inflation slow down when we are still running deeply negative interest rates? For all the jawboning by the Fed, last time I checked US inflation is running around 7% and interest rates are below 0.25%.

[ChpBstrd]

One of the major suppliers for my business has more inventory in physical existence than they EVER have in the ~30 year history of the company.

But... they can't get it into my hands, because the stuff is stuck in containers under 30 other containers, or in warehouses waiting to go into a container, etc. They can track the parts and containers and in some cases the stuff is literally sitting a few miles away, but it's not possible to access it.

When the backlog finally clears, there will be a hell of a supply whiplash effect, I'm guessing. Everything will suddenly be on sale. We'll go from inflation to deflation in like 2 months.

When that actually happens is anyone's guess, of course.

-W

Or the opposite is happening. Suppliers tend to stockpile more inventory in an inflationary environment because its cheaper for them to buy it today and then store it than it is to buy in the just in time model that works well in a low inflation environment.

On a fundamental level, why should inflation slow down when we are still running deeply negative interest rates? For all the jawboning by the Fed, last time I checked US inflation is running around 7% and interest rates are below 0.25%.

The last of the US's government stimulus checks, child tax credit advances, and extended WIC and unemployment benefits of 2020/2021 are now making their way to Asia, and American families accustomed to getting a big tax refund each March/April will be receiving a shock (expect the narrative to shift to taxes being too high for the rest of the year).

These helicopter drops are visible in the Personal Savings Rate statistic, which went up despite mass unemployment. We are now back to 2018/2019 levels because the stimulus faucet has been shut off and all businesses are back open.
https://fred.stlouisfed.org/series/PSAVERT

Half the 2021 child tax credit ($3600*0.5=$1800 per kid under age 6, $3k*.05=$1500 otherwise) was prepaid to parent taxpayers during 2021, and those dollars went to Asian imports / US treasuries a long time ago. The demand driven by the spending of those dollars is reflected in the 2021 numbers. So in March/April 2022, parents will only get the remaining $1800 credited toward their tax bill. Next year, the child tax credit decreases to $2k per child, and there will be no advance. Thus the helicopter blades will reverse and people's effective tax rate will seem higher in the next 24 months. Simultaneously, last year's high inflation will have reduced people's Real Disposable Income, forcing choices between wants and necessities and maybe suppressing some discretionary purchases, even if nominal spending goes up. 

https://fred.stlouisfed.org/series/DSPIC96

In brief, the Fed still has good reasons for the "transitory" narrative, even if the impact of the unprecedented stimulus of the last 18 months peaked inflation higher than initially expected and made that word radioactive. All that stimulus is being yanked out at once.

[vand]

The thing is that just returning interest rates to 2-3% range and expecting inflation to return to pre-pandemic levels isn't going to work.  You can't let the genie out of the bottle, pop the cork back in and expect the genie to return back into the bottle.

Once inflation gets hold you have to get out in front of it to bring it down, and that just isn't happening  - and it won't happen until the pain of ongoing inflation grows more unbearable than the pain of having to deal with it. That's why I'm fairly confident that this will run and run.

Oil traded above $90 today.
The transitory narrative is a dead duck, and the only question now is how long it will take before the Fed takes it seriously.

[waltworks]

I guess we'll see. From my perspective sort of embedded in the middle of the supply chain for imported stuff (bike parts) this is a moderate increase in demand (which has now mostly subsided) combined with a TOTAL failure of supply. Bring supply back to normal and I think inflation, at least in my industry, dies pretty fast.

Obviously I could be wrong. But with no more stimulus money, supply chains presumably getting unknotted at some point, and the continuing (and in fact increasing) demographic spiral the developed world is in, I don't see inflation being a big thing long term.

-W

[daverobev]

I guess we'll see. From my perspective sort of embedded in the middle of the supply chain for imported stuff (bike parts) this is a moderate increase in demand (which has now mostly subsided) combined with a TOTAL failure of supply. Bring supply back to normal and I think inflation, at least in my industry, dies pretty fast.

Obviously I could be wrong. But with no more stimulus money, supply chains presumably getting unknotted at some point, and the continuing (and in fact increasing) demographic spiral the developed world is in, I don't see inflation being a big thing long term.

-W

Could be a good few years of it though, I'd imagine..?

[waltworks]

I guess we'll see. From my perspective sort of embedded in the middle of the supply chain for imported stuff (bike parts) this is a moderate increase in demand (which has now mostly subsided) combined with a TOTAL failure of supply. Bring supply back to normal and I think inflation, at least in my industry, dies pretty fast.

Obviously I could be wrong. But with no more stimulus money, supply chains presumably getting unknotted at some point, and the continuing (and in fact increasing) demographic spiral the developed world is in, I don't see inflation being a big thing long term.

-W

Could be a good few years of it though, I'd imagine..?

I guess. I mean, I would personally bet on this year. The demand side is back to normal already. So we're just waiting on supply chain, the actual physical goods/bike parts would be abundant now if they could just be unloaded.

But my crystal ball is just as shitty as everyone else's.

-W

[American GenX]

Also, remember that if inflation comes down in a few years, that does NOT mean prices come back down, which a lot of people seem to think.  I've seen that misinformation repeated quite a few times in the main stream media and by politicians, including Biden.  Eventual lower inflation just means that prices won't continue to increase as quickly as they had been, but the sky high prices will remain in place.  I'm already look at about 15% to 20% increased costs across the board combined over the last year with no increase in actual or budgeted consumption due to inflation.  As a disclaimer, there may be some specific things that could drop in price, but as long as there is any inflation at all, on balance, prices will increase.

[waltworks]

Tell us about your 15-20% cost increases, por favor.

Or at least tell us you didn't pay off your mortgage!

-W

[American GenX]

Tell us about your 15-20% cost increases, por favor.

Or at least tell us you didn't pay off your mortgage!

-W

LOL.  I haven't had a mortgage in about 20 years.  But I wasn't posting because I need any assistance with my own budgeting and spending.  I've managed to maintain an 80% savings rate in most recent years.

[waltworks]

Tell us about your 15-20% cost increases, por favor.

Or at least tell us you didn't pay off your mortgage!

-W

LOL.  I haven't had a mortgage in about 20 years.  But I wasn't posting because I need any assistance with my own budgeting and spending.  I've managed to maintain an 80% savings rate in most recent years.

Bummer, you could be making money on a low rate mortgage if you're worried about inflation, but I digress... so what expenses are up 15-20%? Or were you just making that up?

-W

[ChpBstrd]

Tell us about your 15-20% cost increases, por favor.

Or at least tell us you didn't pay off your mortgage!

-W

LOL.  I haven't had a mortgage in about 20 years.  But I wasn't posting because I need any assistance with my own budgeting and spending.  I've managed to maintain an 80% savings rate in most recent years.

Bummer, you could be making money on a low rate mortgage if you're worried about inflation, but I digress... so what expenses are up 15-20%? Or were you just making that up?

-W

Hookers, blow, and Amazon Prime?

[daverobev]

Where I am, petrol is up from a low of say €1.30 to €1.85. 'Everything' in the shops is going up... well no, but lots of stuff seems to be up 10% (sunflower oil for example was €1.40, it's now €1.7x).

You can still get stuff cheap, but if you're not paying attention... Flour for example was ~50 cents a kilo and it's now 60.

Happily our mortgage is fixed for its life, and our natural gas price is fixed for the next couple of years.

I think things are a LOT worse for those on the poorer end of things, unfortunately. Heating costs going up by 40% for a wealthier person is negligible. But an extra €200 a month or whatever in the winter is going to hurt a lot of people.

[MustacheAndaHalf]

I guess. I mean, I would personally bet on this year. The demand side is back to normal already. So we're just waiting on supply chain, the actual physical goods/bike parts would be abundant now if they could just be unloaded.

Wanted to emphasize American demand is back to normal - not necessarily China and Europe.  The Fed has predicted the first half of 2022 for inflation to fall - but they screwed up this exact calculation last year, so it's not a bad time to predict the Fed will be wrong... again.

I suspect demand from Europe and China will delay the time when inflation subsides.  As their demand ramps back up to normal, the supply chain will have recovered to the point it can handle U.S. demand.  And if China has more lockdowns per it's "zero Covid" policy, that also delays supply chain recovery.  Seems like a lot can go wrong with the Fed's prediction, and the Fed has already got it wrong before.  So I'm siding with uncertainty, and against the Fed on this one.

[DaTrill]

Short answer, nobody knows. 

Common answer is if earnings growth is faster than the rate of change in rates will not sink the stock market. 

Any estimation is in-valid as we are outside of what is called a "relevant range" meaning the current environment is outside the range of historical data and any estimation is not scientific.  Also, odd things often occur near intercepts.  For example, if rates are increased from 0.25% to 0.50% is either a minimal increase in nominal rates of 0.25% which is historically a non-event, but also an increase in 50% magnitude which would cause a depression in most past periods.  Which effect is dominant?  Nobody knows as this is outside of the relevant range of historical data. 

[Mr. Green]

Also, remember that if inflation comes down in a few years, that does NOT mean prices come back down, which a lot of people seem to think.  I've seen that misinformation repeated quite a few times in the main stream media and by politicians, including Biden.  Eventual lower inflation just means that prices won't continue to increase as quickly as they had been, but the sky high prices will remain in place.  I'm already look at about 15% to 20% increased costs across the board combined over the last year with no increase in actual or budgeted consumption due to inflation.  As a disclaimer, there may be some specific things that could drop in price, but as long as there is any inflation at all, on balance, prices will increase.

+1. If I was a greedy company that raised my prices due to a supply shortage during a pandemic that resulted in record profits and there was no backlash to the point that it impacted my bottom line, there would be no incentive to lower them as production costs decreased. Sure some of the most extreme increases may come down a bit but I fully expect the increases on everyday goods to be permanent.

[waltworks]

You might be surprised. The consumer goods/food industries are insanely competitive. You can make less per unit and win in both the short and long term if you steal enough market share, assuming your production costs drop at some point.

-W

[ChpBstrd]

Also, remember that if inflation comes down in a few years, that does NOT mean prices come back down, which a lot of people seem to think.  I've seen that misinformation repeated quite a few times in the main stream media and by politicians, including Biden.  Eventual lower inflation just means that prices won't continue to increase as quickly as they had been, but the sky high prices will remain in place.  I'm already look at about 15% to 20% increased costs across the board combined over the last year with no increase in actual or budgeted consumption due to inflation.  As a disclaimer, there may be some specific things that could drop in price, but as long as there is any inflation at all, on balance, prices will increase.

+1. If I was a greedy company that raised my prices due to a supply shortage during a pandemic that resulted in record profits and there was no backlash to the point that it impacted my bottom line, there would be no incentive to lower them as production costs decreased. Sure some of the most extreme increases may come down a bit but I fully expect the increases on everyday goods to be permanent.

I think the point made by @American GenX includes both consumer prices and producer prices. E.g. if a business that supplies retailers hires 100 people today and the inflation rate declines, their labor costs don't ever go down. Maybe they just go up at a slower pace. It's the same with rent, utilities, transport costs, etc.

[paulkots]

IMO

Fed will be bouncing between trying to keep the markets happy(lower rates) and trying to tame the inflation(higher rates) for a few years. I doubt fed will go over 2% in rates and because of this, higher inflation will stick around for a few years.

And yes, prices in general will not go down, that’s not how inflation works. Labor is more expensive, people will not be taking pay cuts.


Sent from my iPhone using Tapatalk

[Tyson]

Many people have been underpaid for a long time now.  I'm happy to see them getting more money.

[Mr. Green]

Sure inflation can go down. Inflation rises to the point that people stop spending money, a recession happens, people get laid off, prices come down to try and bring back spending. Classic deflation. The only question is whether the government would allow this to happen or if they'd throw more stimmy money to try and keep the economic engine going. Recent events suggest stimulus is what would happen but you never know.

[MustacheAndaHalf]

Sure inflation can go down. Inflation rises to the point that people stop spending money, a recession happens, people get laid off, prices come down to try and bring back spending. Classic deflation. The only question is whether the government would allow this to happen or if they'd throw more stimmy money to try and keep the economic engine going. Recent events suggest stimulus is what would happen but you never know.

Isn't the natural first reaction to inflation to buy stuff before the price goes up?  Meaning if you know your cash will buy less in 6 months, you would want to buy at today's prices instead.  That, in turn, leads to more demand - which itself causes more inflation.  I suspect the Fed has already allowed this to happen, so if there's a counterpoint against it, I'm curious.

[paulkots]

Exactly what I did. On the news that the siding and windows I wanted for my house were going up 10% in price November last year, I ordered both even though my remodel will start summer/fall 2022. In order to get the old price, I agreed to pay upfront and wait as long as necessary which was ok with me since my remodel was a long way out, 4 months later, everything showed up.

[American GenX]

Tell us about your 15-20% cost increases, por favor.

Or at least tell us you didn't pay off your mortgage!

-W

LOL.  I haven't had a mortgage in about 20 years.  But I wasn't posting because I need any assistance with my own budgeting and spending.  I've managed to maintain an 80% savings rate in most recent years.

Bummer, you could be making money on a low rate mortgage if you're worried about inflation, but I digress... so what expenses are up 15-20%? Or were you just making that up?

-W

I would have to go back in time OVER 20 years to when I got my last mortgage, but the rate was about 7% back then as well, and that was before I was into stock fund investing beyond a moderate withholding through my job.

Some expenses are up over 60% for me, like a big increase in my health insurance with our new insurance coverage through work, not to mention higher out of pocket costs.   I increased my home maintenance and car replacement sinking funds over 20% due to the pricing I'm seeing (I may actually be underestimating on the home repair costs), which includes some significant home maintenance projects that are needing done, Medicare is up over 15% (future budgeting), homeowner's insurance close to 13% in just one year, heating bill around 30%.   No, I'm not making it up - I wish I was.  And even if inflation drops in a few years down to say 3%, that doesn't mean prices will drop (or even level off) as I have seen people say including in the mainstream media.  They will continue to rise, on average (of course there will be some exceptions).  There are a lot of hard times ahead for most people.   I've delayed FIRE for at least OMY strictly because of inflation after having previously been 90% certain I would FIRE this spring.  It's depressing.  It looks like it's only a matter of time before the market drops further as well, just compounding the problem.

[waltworks]

Yeah, healthcare has been going up like crazy for a couple decades now. Sucks to be the USA.

I haven't seen any meaningful increases in any of the other categories (ie home expenses, heating/nat gas, etc) here in UT but maybe they're up a lot elsewhere.

The thing I have noticed most is food prices going up 5-20% depending on the item, but that might be mostly timing as I buy a lot of produce and a lot of it is out of season right now.

3% mortgage is sure nice to have when you're FIREd!

-W