Federal Reserve rate hikes: What it means for you | LiveNOW from FOX

we have Mike Walden joining us. He’s a distinguished professor emeritus. at NC State University. Mike, thank you so much for joining us. We appreciate it. Well, two things about this one. It would continue to plan, to raise interest rates for the people are borrowing Less businesses are born last their antennas to slow down the economy. to take the pressure off of prices and get the inflation rate, lower and it had some success If you look over the last year, we had nine percent in June of last year, year over year, we had latest number is

6 percent. Their target is 2%. This is going to make things more expensive. particularly, if you’re borrowing borrowing money, the other thing, however, that just happened since the last time the FED met was this many at what I call many Financial crisis where we had a couple of banks fail and we’ve had very quick action, I I think by the federal government to to prevent depositors from losing money prevent their being a run on banks if you will. But the Federal Reserve I think is now under a lot of pressure maybe to take a pause

in the interest rate hikes because part of the reason, the banks failed is that they had suits they had investments in federal had that they

bought years ago when interest rates were lower than when they go to sell those Securities now. to meet, depositors demand for cash, they can’t sell them at their what they bought them for. a couple of years ago. So they took a loss and that was one of the big factors and so people are pointing fingers at the FED saying ah you’re behind some of this. concern with that we’re having in

the financial markets. I think the Federal Reserve while they recognize the concerns about the The. stability of the financial system. I think they’re going to stick to their plan. of modestly raising interest rates until they see evidence that the economy of significantly Slowing and then inflation rate is significantly baby. baby and a big topic right now in the financial world is the record amount of credit card used by Americans, What would What would rate hike do for those people that are basically living on credit cards taken on that credit card debt, as they try to

make ends meet? Well, we make it more expensive. and again, this is this is the downside. what the Federal Reserve is doing. Because, yes, there are many families who have to borrow money to make ends meet. and the Federal Reserve by raising interest rates going to be more expensive. So those forces are going to have to pare back. and they hopefully, they’ll be able to find expenses that they don’t need to live. live month to month. They can they can delay by knows but that’s that’s why the Federal Reserve is really under the gun. They

don’t have any friends right now. because on the one hand, they’re raising interest rates and making it more expensive for you. And I on the other hand, they were criticized by some in Congress. just last week chair chairman Pao was criticized by both. Republicans and Democrats. for his policy of raising rates. And what that did to cause perhaps these Financial shutdowns that we’re still dealing with. So, the Federal Reserve has undergone I’ve been, I’ve been a professional. Economist for almost 50 years. I’ve seen many cases like this in the past the Federal Reserve always gets

hammered when they’re sort of what? one Economist years ago said taking a punch bowl away from the economy. they’re taking the punch bowl away from the party. You that it means they’re raising interest rates. so people don’t have as much as ready access and is cheap of access to care The other thing to keep in mind is that a reserve kind of brought this on themselves, because during covid and they pushed interest rates to Historic lows. So people got used. the very, very low interest rates. People got used to being rates. to take out a

home mortgage 30-year fixed mortgage for less than three percent. Now it’s over 7%. and so in some sense the Federal Reserve is contributed to their image problem right now. but I think the Federal Reserve j-20 chairman Pao does not serve at the pleasure of the president Federal Reserve is in the pen and I think they’ll stick to their guns. And I think they are are focused on getting that inflation rate much much more back to to where it was creepy. Pandemic, where it was around 2 percent a year. And I wanted to ask you about

that because obviously raising these rates hopefully would have a positive impact on bringing down that inflation. that we really seen that at this point, like it’s just gonna have to continue indefinitely. These rate hikes are we seeing a bit of an impact on that inflation? Any positive progress at all from your perspective. Yes. There has been positive progress. been had we hope the peak was last June. when you’re every year the inflation rate was 9%, the latest rating is 6%. your reader. So it looks like we’re making progress. There’s a question I Economist So how

much of this progress is, did it what the Federal Reserve is doing? now? How much, how much is due to? The fact, the supply chain has dramatically improved, over over the last year. we always make an Amish, we talk about supply and demand. the problem with creating in place. Ation was we had problems on the supply side. So there wasn’t things for people to buy. on the demand side once the economy opened up and people at all this money from the various stimulus programs, they tried to buy stuff, wasn’t there prices go up. So we

learn, we don’t know what the division there is between the progress we made on inflation between on inflation feds done in the supply chain. But I do think we’re making progress. and I think we’ll continue to make progress. most of the forecast you look out now, say at the end of this year, maybe we’ll have an inflation rate, your V or 4% that’s still not where the Federal Reserve wants. So I think we’re going to see some rate rate hikes continuing this year, maybe into the beginning of next year before the Federal Reserve can lift

up on the brake. Well, when I ask you this question, that, what parts of theeconomy are actually the most impacted by? these rate hikes or what do you say? anything that? two things? any industry that depends on people borrowing money to buy things in that industry. So obviously the real estate market. We’ve seen that I think we’re going to see more downsides on the on the downsides on and then, manufacturing and is also impacted because manufacturers make things on sometimes that are there were expensive for people to buy. so they have to borrow money. construction

obviously because of homebuilding slowing down. on the other hand things like Health Care. supermarkets, They will not be as impacted because those are really Necessities. So anything that people can delay buying that they don’t need to have to to buy on. A monthly basis they’re going to be hardest hit by these rate hikes Great hikes. and a big question that I think is important to a lot of our viewers out there. What can people do to lessen the impact of these interest rate increases Is there anything at all? They can do to just make life

a little bit easier, Is it just tighten up the belt and not spending as much? when I get talks I’m always asked this question from a variety of groups. and I get the same answer That is that people have to act like a business. When a business faces. reduction in revenues. They got to cut costs. so they look at where they’re spending their money. They look at things that they can maybe cut back their own is important. Households have to do the same thing First thing you have to do a budget have to find out

where your money’s going You have to prioritize. you have to say. All right For example, I’ve been eating out at restaurants I enjoy that. maybe five times times a week. It’s cheaper to. buy fo food that you make in the supermarket to make it athome. home back to cut your food. bill by about a half going that So people have to prioritize and find things they can cut back on temporarily not forever, temporarily in order to make sure that they’re not overspending. All great advice there. Well, great advice there. the questions I had for you

but of course I want to turn it over to you before I get you out of here. Anything you want to add that? I didn’t ask you about anything. I’m missing. Well these are the, these Federal Reserve meetings are very important. They have everything happen every six weeks. So a lot of the financial news people of bleary-eyed because it’s complicated, it’s not very interesting but but whenever the Federal Reserve now speaks it’s important for people to listen. and so listen today, if they do have a rate hike how high it will be and take that

into account in terms. Of your financial planning. and hopefully people take that advice will be a lot of years. A lot of eyes on the Federal Reserve, folks today Mike Walden professor emeritus at NC State. We appreciate your time. Thank you

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