The Federal Reserve raises interest rates for fourth time in 2022

Local financial experts discuss state of economy, fears of recession

CHATTANOOGA (WDEF) — For the fourth time this year, The Federal Reserve is raising interest rates again, leading some to fear a recession is imminent.

According to CBS News, today’s increase brings the federal funds rate to between 2.25% and 2.50%.

With inflation still on the rise, the new numbers are a far cry from the near 0.25% rate Americans saw at the beginning of the year.

The Federal Reserve raised interest rates by three-fourths of a percentage point on Wednesday in an attempt to cool down still-rampant inflation.

Chris Hopkins of Chattanooga’s Apogee Wealth Partners says the drastic measures are due to the drastic rise in prices.

“The lesson we learned in the ’80s is that has to be attacked aggressively and this inflation got pretty bad pretty quickly,” Hopkins said. “So the Fed has been much more aggressive. Effectively, the idea of raising interest rates incrementally is to dampen overall demand — in other words, to slow down the economy.”

Hopkins says the rate hike is well above an average one.

At the federal level, he says there’s a high probability Americans will see a second-straight quarterly decline in the country’s economic output and GDP.

“That doesn’t necessarily define a recession, but it’s more evidence that may be on the cusp of one or heading into one,” Hopkins said. “That’s the big debate: are we going to have a recession? Likely.”

John Vandergriff of Blue Ridge Wealth Planners knows just hearing the word recession mentally sends residents back to 2008.

However, he says the current economy’s state is much different than it was 14 years ago.

“Consumer spending is at a really good rate right now,” Vandergriff said. “We also are at near record-low unemployment and we’re seeing hourly wages still increasing. You don’t see those things happen whenever you have a true recession. What we’re in right now is a forced recession because we delayed the action to fight against the inflation that we’re in right now.”

The newly raised interest rates match what the country’s numbers were back in the summer of 2019 before the pandemic began.

For those concerned about a recession, Hopkins says to maintain a balance in spending and investments.

For those currently investing, Vandergriff says to not get scared and pull out of the market, as the times have shown staying in is most effective.