One of the consistent themes over the last 18 months has been a US economy that continues to exceed expectations on the upside in both growth and employment. Despite one of the most rapid Federal Reserve tightening cycles of the last 40 years, the economy and consumer spending have continued to power through. This Capital Group article may provide some interesting insights as to why the economy has not been as sensitive to interest rate changes as during prior rate hike cycles. Because such a large share of US consumers has locked in long-term mortgage rates at very low levels, shelter inflation has not impacted many homeowners. In fact, this research suggests that as much as $1.8 trillion of consumer spending can be attributed to the benefits consumers enjoy from these low fixed-rate mortgages. This is certainly not the only reason behind the continued strength in the economic conditions, but it has undoubtedly contributed.

Read the full Capital Group article here

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