As of January 2008, the most recent month for which data are available, about 24 percent of subprime adjustable-rate mortgages (ARMs) were ninety or more days delinquent, twice the level one year earlier. 1 Roughly 190,000 foreclosures were started on these mortgages in the fourth quarter, up 11 percent from the previous quarter.
Interest rate is a blunt instrument. It first slows growth and then inflation. But the growth slowdown has not been commensurate with inflation control. The above three considerations will suggest that the recent persistence of inflation is a puzzle.