One question here - I know that theoretically rising interest rates should make people less likely to take on auto/home loans or to buy on credit, but are people that rational? I've talked to exactly zero people who've said "with these higher interest rates, I think I'll be deferring my decision to buy a home for a bit". This lack of rationality seems like an even bigger risk in the credit card space.
Or is that why this kind of economic cooling behavior by the government often causes a recession? Because people won't change their behavior until the environment is truly scary?
Market estimates of inflation are as high as ever (5-year, 5-year is a good tell, because it leaves out "transitory"), equities have been collapsing, and real rates are spiking.
Real rates spiking is interesting because it either means real growth estimates are increasing (doubtful given equities collapsing), or probability of default is increasing. The latter is obviously not great...
One question here - I know that theoretically rising interest rates should make people less likely to take on auto/home loans or to buy on credit, but are people that rational? I've talked to exactly zero people who've said "with these higher interest rates, I think I'll be deferring my decision to buy a home for a bit". This lack of rationality seems like an even bigger risk in the credit card space.
Or is that why this kind of economic cooling behavior by the government often causes a recession? Because people won't change their behavior until the environment is truly scary?
I'm not sure I agree here - look at the movement on these rates vs. equities
https://fred.stlouisfed.org/graph/?g=PfTR
Market estimates of inflation are as high as ever (5-year, 5-year is a good tell, because it leaves out "transitory"), equities have been collapsing, and real rates are spiking.
Real rates spiking is interesting because it either means real growth estimates are increasing (doubtful given equities collapsing), or probability of default is increasing. The latter is obviously not great...