As interest rates go up so does the pressure on borrowers
When the dynamics of monetary policy change we have to change what we look at as a consequence. Economies are often finely balanced and the auto sector is one example where changing interest rates can change the fortunes of an industry.
Vehicle sales have been strong for the last 5/6 years and that's been in no small part to low borrowing costs in the US. Now that rates are on an upward path, those and future borrowers are going to be facing higher repayments. Borrowers got screwed over the crisis but they have reduced debts and saved more, though there are still plenty of people heavily in debt.
The jobs market is strong and wages are slowly picking up. While that's great news it's also a reason for caution. It doesn't take much to push folks into a position where their debts start sucking up all their income. It doesn't take much for people to start holding back on spending when their money suddenly doesn't go as far when there's a hike.
This is probably the biggest fear at the Fed. The US can handle one hike a year but if people think it can handle what the dot plots are showing, then they'll be in for a rude awakening, unless the economy really takes off.
The same dynamics that apply to the auto industry can be mirrored in other sectors like broader consumer spending and housing, and those are the signs we need to look for when assessing the data. If the consumer starts feeling the pinch from the Dec hike, you can kiss another one goodbye for a long while.
