Fed largest increase in interest rates leads to stock market roller coaster as economy tightens

CHATTANOOGA, Tennessee (WDEF)- The Fed has raised interest rates again this year. This time by half a percentage point. This follows The Fed’s decision to raise its rates. In March they increased rates by a quarter percentage point.

“Things are getting more expensive. Supply chains are out of whack causing inflation to be much higher than it has in several decades not just years but in decades. What the fed does, is when they raise interest rates it’s harder to borrow, it makes it harder for companies to grow. It starts tightening the economy. Tightening the economy is a scary-sounding thing and we need to understand what that means for us as individuals,” said John Vandergriff, Blue Ridge Wealth Planners.

Inflation has reached a 40-year high, according to the Bureau of Labor Statistics. This means the cost of living increases, in salaries, can’t keep up.

“You normally get an annual increase in cost of living. But we’re looking at daily or monthly increases, in an absence of this being a daily thing, which would be a lot worse on companies than tightening the economy. Having to basically raise rates of pay every day would be anything really hard to keep up with and a moving target that companies’ cash flow would not support,” said Vandergriff.

The interest rate increase means it will be more expensive to borrow money for mortgages or car loans.

“Give that stuff permission to just increase crazy fast. Now you look at your bank account. Banks will happily pay you as little as they can, for as long as I can see, you now have ammunition to go to them and say hey the Fed increased interest rates have a percent I know you’re getting paid more why aren’t I making as much as it should be in the savings accounts,” said Vandergriff.