Here's What Fannie Mae Sees as a Big Risk to the Market
In January, Fannie Mae (OTC: FNMA) released its latest economic and housing outlook, where it provided its forecast for the housing market and broader economy in the coming years. In that report, the enterprise expressed concern about the potential inflationary pressures we could see soon, along with the related effects they could have on interest rates. Inflationary concerns have been on investors' minds for a decade now, but current concerns are due to the massive amounts of stimulus injected into the economy as part of efforts to combat the COVID-19 pandemic. Here's what Fannie Mae has to say about the matter.
Fannie Mae forecasts a pickup in inflation beginning in the fourth quarter of 2021, continuing into 2022. Its primary concern is that we developed a sense of complacency regarding inflation because we haven't seen many warning signs since the financial crisis in 2008.
Last year, the Fed announced that it will let inflation "run hot" -- meaning it will let inflation go above its 2% target, and that it will tighten monetary policy, or raise its target interest rates, when needed. However, Fannie Mae isn't entirely comfortable with this guidance, saying "their guidance is insufficient to generate a high degree of confidence regarding how they will achieve this goal." Concerns about inflation have also been shared by former Treasury Secretary Larry Summers and former International Monetary Fund Chief Economist Olivier Blanchard.
Source Fool.com
