Inflation, Interest Rates and Bond Prices – Oh My!

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Interest rates are going up, inflation is impacting our wallets, and bond prices are down. On today’s episode, we break down these issues and how they could impact you.

With the change in mask mandates (maybe) on Planes, Trains and Automobiles (Uber) and covid policies, do you think travel will tick back up? 

We are already seeing higher airline prices coming at the same time as rising gas prices, grocery prices, and more. On today’s episode we are going to break down inflation, interest rates, and investments  – oh my!

We are well acquainted by now about how supply chain disruptions affect inflation. Add to that a shortage of labor, war in Europe and strong consumer demand and it’s a recipe for more persistent inflation.

Inflation is up well over 8% and the Fed (Federal Reserve) is considering how many interests rate hikes it’ll implement this year. How will that affect bank interest, mortgage rates, home prices, food, gas, etc.??

The Federal Reserve’s impact on these rates is often confusing and misunderstood. The Fed controls short-term interest rates, something called the federal funds rate. This is the daily interest rates that the banks charge each other to lend. The ripple effect is it’s felt by customers taking out loans from these banks as well as money market rates. 

Over the past two years, these interest rates were cut nearly to 0% and are now somewhere between .25% and .50%. But the prime lending rate is around 3.5%. So why are home mortgage rates and equity loans jumping up so much more? Contrary to popular belief the fed doesn’t control most interest rates, the market (millions of investors) does.

We’re seeing these jumps in interest rates because the market is anticipating more federal interest rate hikes as well as seeing more inflation at least in the near future. If you’re borrowing money for a home or car, the lender is charging more today to make more money as they expect interest rates to go up soon. The markets, with millions of people buying and selling within it, are the ones impacting these interest rates.

How will these rate hikes impact stocks and bonds? Stock prices and bond prices often have dissimilar movements. Bonds are typically bought for stability; they don’t go up and down nearly as much as stocks. But bonds can move down in value. The value of a bond goes in the opposite direction of an interest rate. Diversification, working with an advisor, and having a strategic plan are essential in these times. Join us today as we break down these issues and more on this episode of Your Money & Your Life. 

If you have any questions for Don reach out at (732) 784-2867 or

Listen to the full episode to learn more or skip around to certain topics.

[0:53 ] Changing mask rules

[2:16] Will travel start up again?

[3:16] Air travel and fuel are up

[5:09] Why are rates jumping up?

[7:16] Prices of homes have gone up

[9:55] Impact on stocks and bonds

[11:07]Bonds are stable, but can go down

[13:00] Reinvesting at a higher rate

[14:45]What is causing this?

[16:11 ] What is an advisor’s job?

[17:29] As you get closer to retirement

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Donald W. Cash – CPA, CFP®, is an independent advisor. After graduating from Rutgers University, he began his career in 1985 as an accountant. In 1990, he entered the field of Estate Planning, concentrating on long-term care planning. Don has been advising clients in the baby boomer and retirement market for 20 years. He has helped over 1,000 families with their planning needs.

Don advocates for a holistic approach to Estate and Financial Planning and has relationships with other professionals including Attorneys, CPA’s, Mortgage Specialists, Insurance Specialists and Asset Managers.

He is married to Cathy and they have 4 children, Carly, DJ, Nick and Tori. They live in Freehold, NJ.

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