Fannie Mae ESR Group: Inflation Is Top Risk Concern For 2022
Summary
The ESG Group believes that the principal macroeconomic concern for 2022 remains accelerating inflation – and how the market and policymakers respond to it. While theres significant room for uncertainty regarding the near-term path of inflation, the ESR Group projects it to peak at approximately 7% annualized in the first quarter of 2022 before gradually decelerating to 3.8% by year-end, according to the report. The ESR Group expects the Federal Reserve to begin a more aggressive pace of monetary tightening in the new year as part of its effort to combat rising price pressures without tipping the economy into recession. “While the economy picked up steam late in the year, unfortunately, so did inflation, and the market expects the Fed to recalibrate its monetary policy as a result,” said Doug Duncan, Fannie Mae senior vice president and chief economist. The group also expects mortgage rates to drift upward, averaging 3.2% in 2022, due to additional home price appreciation weighing heavily on affordability.