Record debt in the US but a rate cut less likely
The US now has record levels of debt. A recently published survey shows that the US population has more debt than ever and is paying more interest on it than before. This is money that will reduce their consumption, which is good for inflation, but has a negative effect on the US economy. Nevertheless, a rate cut is increasingly unlikely.
1. A record $17.5 trillion in household debt
2. A record 12.3 trillion dollars in mortgages
3. A record $1.6 trillion in car loans
4. Almost a record 1.6 trillion dollars in student loans
5. A record 1.1 trillion dollars in credit card debt
US mortgages are now more than twice as high as in 2006 and total credit card debt has officially increased by 50% since 2020. At the same time, crime on credit cards and car loans has just reached its highest level since the 2008 financial crisis. Consumers “fight” inflation with debt. This cannot end well.
All these forms of debt currently have interest rates that are either at record highs or 20+ years high. At the same time, wage growth has failed to keep up with inflation. How will consumers pay off this debt?
Will the Fed take this into account at its next interest rate meeting? A growing number of analysts believe that we will not see a rate cut in March because US businesses are doing better than ever, and a rate cut will push up inflation.
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