STATEWIDE — Last week the federal reserve raised interest rates in a push to try and keep inflation from getting worse.
It’s the job of the Federal Reserve to keep the economy in check-in situations like what many Hoosiers and Americans are experiencing. Your dollar has lees buying power now because there is too much money and not enough stuff, says Ball State economist Mike Hicks.
As a result, the Fed has raised interest rates by 0.25-percent last week, which is the first time they’ve done that since 2018. But, Hicks said that this is the first of many increases we will see this year.
“We’re talking about a one and a half to two percent full increase in their interest rates,” Hicks told Inside Indiana Business. We’re back into too much money chasing too few goods inflation, so as Federal Reserve raises rates you’ll expect that to moderate.”
Hicks does not expect prices to start going down too much as the Fed continues to raise rates, but he does expect the growth in prices to slow down significantly. He said the rate increases will bleed into many facets of the economy including home buying, where mortgage rates are back into the area of 3-percent.
“It could well go to four, four-and-a-half percent,” Hick said. “We’re still talking about historically modest interest rates and borrowing costs. Nothing here that should cause consumers to back off from buying homes, RV’s.”
As the Fed raises rates the desired effect is for fewer people to be inclined to borrow money since now they will have to pay more interest on that borrowed money. This in turn should slow down the economy and inflation, say experts.