Springfield financial experts discuss impact of Federal Reserve interest rate hike

SPRINGFIELD, Mo. (KY3) - Federal interest rates are making a historic jump.

The Federal Reserve raised its benchmark rate by 0.75 of a percent on Wednesday, which is the biggest hike since 1994. It is part of an effort to slow down inflation.

Springfield financial experts say it is much needed, but will impact those looking to take out a loan anytime soon.

From grocery stores to gas pump, you will notice raising prices across the board. Financial experts say it is largely connected to post pandemic spending.

”We have a lot of people that are wanting to buy things, therefore, the prices are going up,” said financial advisor Eric K. Peterson.

There is also a supply shortage at the same time.

”We have a lot of demand, and we have a supply shortage and that’s causing inflation to jump up very, very quickly,” Peterson described. “That’s the scenario that we’re in right now.”

He said increasing interest rates help slow the economy down.

”We may see the inflation rates start to come down,” Peterson said.

Financial experts say this historic move is startling to some people because it happened so quickly.

”I’ve never been through it,” said financial advisor Stephen D. Evans. “In the 80s I was a little kid, you know, I’ve only seen interest rates go down my whole life. You know, no one’s really seen them shoot up like this.”

The move puts the key benchmark federal funds rate at a range between 1.50% to 1.75%. That is the highest since the pandemic began two years ago. So what does this mean for consumers?

”It’s going to raise cost of borrowing money, car loans, you know, your credit card interest is probably going to go up,” Evans said. “So a lot of those things are going to go up. So what they’re trying to do is they’re trying to make things more expensive so there’s not as much money out there.”

This will heavily impact anyone in the market for a new home, financial advisors say.

”If it’s a home mortgage, sorry, interest rates are higher,” Peterson described. “You’re going to be paying more.”

“If you had $3,500 a month to buy a house, and you had that in January, you could have afforded an $800,000 house,” Evans described. “Today, it’s less than 600,000.”

Financial experts say this increase is part of an effort to avoid a recession. They say the Federal Reserve is expected to gradually raise rates before coming back down. Experts say it will help inflation taper off in the meantime.

To report a correction or typo, please email digitalnews@ky3.com

Copyright 2022 KY3. All rights reserved.