Experts explain how another federal interest rate hike will impact your portfolio
BIRMINGHAM, Ala. (WBRC) – The federal government is due to meet next week to determine another interest rate hike.
“They’re clearly doing it so quickly this time because inflation has gotten so bad,” said UAB associate professor of economics Dr. Josh Robinson.
Robinson said it would likely be half a percentage point.
“There’s a school of thought that says it’s still not enough,” Robinson said. “Not a big enough rise based on inflation that we have right now. It’s no exaggeration to say that this is the worst inflation we’ve had in forty years.
Robinson said they’re going to have to increase the traits by more than half a percentage point to make a big difference, but you should notice small changes soon.
“With this hike, we might start to see things stabilize, so it won’t get any worse,” he said. “That doesn’t mean prices will go down, it just means that they will stop rising as quickly.”
Robinson said that depending on the industry, some prices will fall again.
“We could see price declines in some sectors, those where prices are more supply-driven,” he said. “Food production, those have been influenced more by the supply chain than others. Or, used cars, which are very heavily influenced by the shortage of chips and the halt in the release of new cars.
With more federal interest rate hikes likely in the future, Robinson said now is the time to start paying down the debt.
“Now would be a very good time to consolidate that debt into a fixed rate loan,” he said. “Even if the Fed doesn’t get inflation under control, lenders will start pricing their inflation expectations into interest rates.”
The Federal Open Market Committee will determine the exact amount of the spike and they will meet on May 3-4.
They meet again in June.
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