Economics
Fed Hawkishness Peaks as Rising Debt Payments Erode Savings
Excess savings built up in the pandemic are falling rapidly.
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Tighter Federal Reserve policy is raising households’ interest-rate burden, leading to a rapid decline in excess savings and underscoring the likelihood hawkishness has peaked.
The pandemic rise in excess savings was probably the most rapid increase in wealth ever seen. A combination of a collapse in demand and huge government transfers led to an estimated peak of $2.3 trillion in excess savings being accumulated by the middle of 2021.