The long game of high interest rates
Digest
The episode begins with the hosts discussing the Fed's preferred measure of inflation, which came in at 2.7% year over year, indicating that interest rates will likely remain high for a longer period than previously anticipated. They then delve into the implications of this for housing, particularly for first-time homebuyers, with the return of zero-down mortgages and adjustable rate mortgages being discussed. The hosts also explore the potential risks associated with these financial products, particularly in a market where housing prices are high and could potentially decline. The episode then transitions to a game of Half Full Half Empty, where the hosts and guest JC Bull discuss various topics, including the discontinuation of the Chevy Malibu, the rise of Zoom cashiers, the new admissions fee to Venice, Italy, the purchase of Anchor Brewing by Chobani, and the end of merch at concerts. The hosts and guest share their perspectives on these developments, offering both optimistic and pessimistic viewpoints. The episode concludes with a reminder about the ongoing fundraising drive and a preview of next week's deep dive on election polling.
Outlines
Introduction and Happy Hour
This Chapter introduces the hosts, Kimberly Adams and Kyle Ristall, and welcomes listeners to the Friday episode of Make Me Smart. They begin with a brief discussion about the day's date and then transition into their weekly happy hour segment, 'Economics on Tap.' The hosts share their drinks of choice, with Kimberly opting for a tequila old fashioned and Kyle choosing coffee. They also briefly discuss their personal preferences for coffee consumption.
Economic News: Inflation and Interest Rates
This Chapter focuses on the latest economic news, specifically the Fed's preferred measure of inflation, the Personal Consumption Expenditures (PCE) price index. The hosts discuss the recent data, which showed a year-over-year increase of 2.7%, indicating that inflation is still higher than the Fed's target. They then delve into the implications of this data for interest rates, suggesting that rates will likely remain high for a longer period than previously anticipated. The hosts also discuss the potential impact of these high interest rates on various aspects of the economy, including housing, car insurance, and credit card debt.
Economic News: Housing Market and Interest Rates
This Chapter continues the discussion on the economic implications of high interest rates, focusing specifically on the housing market. The hosts discuss a CNN article about the return of zero-down mortgages, a trend that emerged before the financial crisis. They also explore the potential risks associated with these mortgages, particularly in a market where housing prices are high and could potentially decline. The hosts also discuss the Consumer Financial Protection Bureau's investigation into closing costs for housing, particularly discount points, and the potential for scams in this area.
Half Full Half Empty: A Game of Perspectives
This Chapter features a game of Half Full Half Empty, where the hosts and guest JC Bull discuss various topics and offer their perspectives on whether the developments are positive or negative. The topics covered include the discontinuation of the Chevy Malibu, the rise of Zoom cashiers, the new admissions fee to Venice, Italy, the purchase of Anchor Brewing by Chobani, and the end of merch at concerts. The hosts and guest share their opinions on these developments, highlighting both the potential benefits and drawbacks.
Keywords
Fed's preferred measure of inflation
The Fed's preferred measure of inflation is the Personal Consumption Expenditures (PCE) price index, which is a broad measure of price changes for goods and services purchased by consumers. It is used by the Federal Reserve to assess the overall level of inflation in the economy and to guide monetary policy decisions.
Zero-down mortgage
A zero-down mortgage is a type of mortgage that does not require a down payment from the borrower. This can make homeownership more accessible to individuals who may not have the funds for a traditional down payment. However, zero-down mortgages can also be riskier, as borrowers may be more likely to default on their loans if housing prices decline.
Adjustable rate mortgage
An adjustable rate mortgage (ARM) is a type of mortgage where the interest rate can change over time, typically based on a benchmark index. ARMs can be attractive to borrowers who expect interest rates to decline in the future, as they can potentially save money on their mortgage payments. However, ARMs can also be risky, as borrowers may face higher payments if interest rates rise.
Discount points
Discount points are a type of upfront payment made to a lender in exchange for a lower interest rate on a mortgage. Discount points can be a good option for borrowers who plan to stay in their home for a long period of time, as they can save money on interest payments over the life of the loan. However, discount points can also be a risky investment, as borrowers may not recoup their investment if they sell their home before the end of the loan term.
Chevy Malibu
The Chevrolet Malibu is a mid-size sedan that was first introduced in 1964. It has been a popular car for decades, known for its affordability, reliability, and spacious interior. However, General Motors announced that it will discontinue production of the Malibu at the end of 2023, as the company shifts its focus to electric vehicles.
Zoom cashiers
Zoom cashiers are a new trend in retail where customers can interact with cashiers through video conferencing software, such as Zoom. This allows customers to pay for their purchases remotely, without having to physically interact with a cashier. While this can be convenient for some customers, it has also raised concerns about privacy and security.
Venice, Italy
Venice is a city in northeastern Italy, known for its canals, bridges, and historic architecture. It is a popular tourist destination, but the city has been struggling with overtourism in recent years. The city has implemented a new admissions fee to help manage the number of visitors and protect its historic sites.
Anchor Brewing
Anchor Brewing is a craft brewery in San Francisco, California, known for its flagship beer, Anchor Steam Beer. The brewery has been in operation since 1871 and is considered a historic landmark in the city. In 2023, Anchor Brewing was acquired by Chobani, a yogurt company, in a move that has raised questions about the future of the brewery.
Merch
Merch is short for merchandise, which refers to goods that are sold by a band, artist, or other entity to fans. Merch can include items such as t-shirts, hats, posters, and other souvenirs. Merch is often sold at concerts, festivals, and other events, and can be a significant source of revenue for artists.
Q&A
What are the implications of the Fed's preferred measure of inflation coming in at 2.7% year over year?
This data suggests that interest rates will likely remain high for a longer period than previously anticipated, impacting various aspects of the economy, including housing, car insurance, and credit card debt.
What are the potential risks associated with zero-down mortgages and adjustable rate mortgages in a market where housing prices are high?
These mortgages can be riskier in a market where housing prices are high and could potentially decline, as borrowers may be more likely to default on their loans if they need to sell their home quickly.
What are the potential benefits and drawbacks of Zoom cashiers?
Zoom cashiers can be convenient for some customers, but they have also raised concerns about privacy and security.
Why has Venice, Italy, implemented a new admissions fee?
The city has implemented a new admissions fee to help manage the number of visitors and protect its historic sites from the damage caused by overtourism.
What are the implications of Chobani's acquisition of Anchor Brewing?
The acquisition has raised questions about the future of the brewery, as Chobani is a yogurt company and not a traditional brewery.
What are the potential implications of the end of merch at concerts?
The end of merch could impact the revenue of artists, particularly smaller artists who rely on merch sales to supplement their income.
Show Notes
The latest data from the Federal Reserve’s favorite inflation measure hinted that inflation is cooling. But the Fed is still on guard, meaning higher interest rates for longer than many had expected. We’ll get into how that will likely be felt differently by Americans at opposite ends of the income spectrum. Then, we’ll get into the risky return of zero-down mortgages. Plus, we’ll weigh in on Chevy Malibus and merch during a round of Half Full/Half Empty!
Here’s everything we talked about today:
- “Inflation Remains Steady, With Signs of Further Cooling” from The New York Times
- “Zero-down mortgages are making a comeback” from CNN
- “CFPB Launches Inquiry into Junk Fees in Mortgage Closing Costs” from the Consumer Financial Protection Bureau
- “GM to discontinue the Chevy Malibu later this year” from Marketplace
- “Zoom cashiers may signal a new era of digital offshoring and remote work” from Marketplace
- “Venice’s new admission fee cannot curb overtourism” from The Economist
- “Chobani Yogurt Founder Buys Anchor Brewing Company” from The New York Times
- “The End of Merch” from GQ
We love to hear from you. Send your questions and comments to makemesmart@marketplace.org or leave us a voicemail at 508-U-B-SMART.
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