Inflation Is Easing, But Will the Fed Pull Back on Rate Hikes?

To view this email as a web page, click here.

What's Happening Today

Investors will be hearing from several policymakers from the Federal Reserve today, and will be paying close attention to their thoughts on inflation, the economy, and the future path of rate hikes. The central bank is set to kick off another policy meeting next month, and while declining inflation has renewed optimism the Fed won't hit the economy with another massive rate hike of 75 basis points, hawkish comments from Fed presidents could take a swing at those hopes.

In remarks this morning, St. Louis Fed President James Bullard said rate hikes to date have only had a "limited effect" on inflation, and said more rate hikes would be needed to bring inflation down. Markets have been falling today as investors grapple with the possibility of higher rate hikes in our future.

Higher interest rates hurt everyone, even if you're not watching markets closely. Not only could it sting your retirement accounts, but it also makes borrowing money much more expensive. So far Fed rate hikes have sent the average interest rate on a 30-year fixed-rate mortgage soaring to more than 7%, the highest it's been in two decades.

That has put pressure on the real estate market, which has been red hot throughout the past two years. But as interest rates on home loans have skyrocketed, prospective buyers have been choosing to sit and wait as the cost of purchasing a home has become too expensive. Today the Census Bureau released its latest figures on housing starts, or the number of new homes being built. New residential home construction dropped 4.2% from September, and was 8.8% lower than last year. Permits to build new homes also dropped last month, and were 10% lower than in October of 2021.

If you're interested in buying a home this is both good news and bad news. Lower housing supply has in part fueled higher home prices. But with so many buyers choosing to wait, sellers may be more willing to negotiate and lower their asking price.

- Kristin

Editors' Picks

Fed's Bullard Says Rate Hikes Have Had 'Only Limited Effects' on Inflation So Far (CNBC)

Where We're Still Spending Despite Inflation's Hangover (The Balance)

Even Though Markets Were Bearish, 401(k) Participants Kept Investing Last Quarter (CNN Business)

Should You Contribute to a 401(k) Plan, and How Much? (The Balance)

Seasonal Work: What It Is and How To Find a Seasonal Job (The Balance)

Traditional Health Insurance Plan vs. High-Deductible Plan: What's the Difference? (The Balance)

How To Use Your HSA To Save for Retirement (The Balance)

Term of the Day

High-Deductible Health Plan

A high-deductible health plan (HDHP) is a health plan that typically has lower monthly fees than other types of plans. However, as the name suggests, you'll need to pay more before your insurance begins to pay. You'll be paying for the treatments you need until you meet your maximum out-of-pocket (OOP) costs.

The deductibles for an HDHP are often higher than the minimums set by the IRS, and they may be as high as the plan's maximum OOP costs. Maximum OOP costs include deductibles, co-payments, and coinsurance. Deductibles exclude monthly fees and costs not covered by your HDHP, including out-of-network expenses.

All plans bought through an Affordable Care Act (ACA) Marketplace, and most through other means, must cover certain preventive services at an in-network provider no matter how much of your deductible you've paid. HealthCare.gov provides lists of preventive services for all adults and those only for women and children.

Off the Charts

If you're in the process of paying off credit card debt, remember that credit card interest compounds, which means previous interest charges are included in each monthly interest calculation.

As a result, card balances can grow quickly, and every APR percentage point matters. Even small changes to your card's interest rate—similar to what we've seen happen to the average credit card APR over the past year—can add up to higher debt costs. So if you fall behind on your monthly payments, those costs can rise even more under a much higher penalty APR.