Support our non-partisan non-profit newsroom 💜 Donate now
My Two Cents

Rising Rates

Chris Farrell Jun 18, 2007

There’s a lot of handwringing over the rise in long-term interest rates, especially when it comes to stock market values. But I’m skeptical for now. The jump in long-term bond yields doesn’t seem to reflect rising inflation. An overall increase in the price level just isn’t in the numbers.

No, a better interpretation is that higher yields are driven by optimism among investors that the economy will grow at a faster pace without generating genuine inflation pressures.

To be sure, mortgage rates are climbing and that’s bad news for the housing market (and not just the subprime portion of it). But gains in the rest of the economy will be strong enough to offset the housing drag. At least that’s what I think the bond market is saying.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.