The pace in which interest rates rose in 2022 was a surprise to just about everyone. There is no doubt that this phenomenon was spearheaded by what was considered rapidly progressive inflation. At the beginning, the Federal Reserve declared inflation a transitory result of the pandemic. However, inflation did not seem to be going away as 2022 progressed and some felt the Fed panicked by jacking up short-term rates too severely.

However, the Federal Reserve was determined to rein-in this inflation before it became embedded long-term within psyche of consumers and thus the economy. And indeed, as 2023 waned, we did start to see better news with regards to inflation. For example, the Consumer Price Index was up only a total of 1.0% from July through November. Earlier in the year we saw 1.0% increases monthly. On Thursday of last week, we saw the final 2022 report, which again came on the tame side, though a bit higher excluding the volatile components of food and energy.

As mentioned earlier, consumer expectations are key with regard to the long-term “stickiness” of inflation. What is the consumer seeing? For one, gas prices have come down from near $5.00 per gallon to near $3.00 per gallon. The media loves to blast the trend of gas prices in the headlines. But short-term rates are stubbornly high, contributing to higher costs for credit cards, cars and more. The key to interest rates moving lower is convincing the Fed that we are winning the inflation battle. The good news is that better inflation news can cause long-term rates, including mortgages, to move lower even before the Fed makes their move.

Dave Hershman is the top author in the mortgage industry. Dave has published seven books, as well as hundreds of articles and is the founder of the OriginationPro Marketing System and Mortgage School. Want to send this commentary and other news in a personalized format to your sphere database or on social media?  Sign up for a free trial at

Jessica Starvaggi

OriginationPro/The Hershman Group