Financial impact to another Federal Reserve interest rate increase
CHATTANOOGA, Tennessee (WDEF)- This week, the Federal Reserve raised interest rates by three-quarters of a percentage point. This is the largest rate increase since 1994.
“Touting recession, and the closest thing you can think of is either Covid or 2008, and that doesn’t give you the warm and fuzzies when you hear that word,” said Vandergriff.
The Federal Reserve raised rates by a half-percentage point in May. After a record 40-year high inflation, the Fed then raised rates by three-quarters of a percentage point while the stock market also went into a bear market this week.
“We can’t continue on with 8% inflation rates. Even though that’s really good for businesses. It’s really terrible for the individuals who are actually spending the money,” said Vandergriff.
John Vandergriff, with Blue Ridge Wealth Planners, say’s, The Fed’s goal is to stop inflation. This could lead to a recession but that doesn’t mean 2008 all over again.
“A recession just means the slowing of the economy for an extended period of time, two quarters. When we look at it, this recession, it doesn’t come out of nowhere. We’re doing it on purpose, so it should not be as scary,” said Vandergriff.
The impact also extends to being more expensive to borrow money. For example, your mortgage rates are much higher.
“It is way more than it has been, but we’ve been at historic rock-bottom interest rates for a long time. If you told somebody in the 80s that you could get a 5% interest rate, as terrible as it sounds today, they would be climbing over people to get it,” said Vandergriff.
Vandergriff advises staying the long-term course and remembering you prepared for market volatility.
“As long as you’ve had a conversation with somebody about your risk, and you’ve been able to dial that in appropriately, you shouldn’t have to make any changes. You should just be able to weather it,” said Vandergriff.