The Federal Reserve and its Chair, Jerome Powell, raised interest rates by three-quarters of a percentage point on Wednesday, June 15th, 2022. The raise is the highest of its kind in nearly 30 years. Desperate times call for desperate measures, and The Fed is no exception, as it attempts to regain control amidst the chaos.
So, what do raised interest rates (historical ones at that) mean for the country, and for you, the individual investor?
For the country, it feels like a last-ditch effort to slow consumer demand. Demand is high, supply is low, therefore, prices continue to rise. By raising the interest rates, in theory, spending will slow as it will make it more difficult to make expensive purchases, carry steep credit card balances, etc. Whether or not this will be enough to promote a “soft-landing” remains to be seen. In the meantime, we can assume the housing market will become stale. High-interest rates will be unappealing to buyers, and sellers will be in no rush to abandon their mortgages living on low-interest rates. As an example, the average rate on a 30-year fixed home loan is near 6%, according to Bankrate, double what it …
