Higher interest rates haven’t dented the real economy much because household incomes have been unusually strong and the interest rates households are actually paying on their loans has not yet risen much. But there’s an element of keeping the faith here. Higher interest rates will eventually bite harder. Indeed, lots of lenders withdrew their mortgage deals this week and will soon replace them with ones carrying higher interest rates. That’s why we remain in the recession club, even if it’s a lonely place to be.
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