Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee hearing, Thursday, March 3, 2022 on Capitol Hill in Washington. On Wednesday, June 15, 2022, the Fed announced a three-quarters of a percent interest rate increase. (Tom Williams, Pool via AP)
SALT LAKE CITY — The Federal Reserve announced Tuesday that it will raise the interest rate to a range between 0.25 and 0.5 percent. It is the first time since 2018 that the Federal Reserve has raised interest rates. Experts say it is meant to slow the economy down and affect inflation.
“Raising an interest rate slows demand,” said Shane Stewart, a certified financial planner with DMBA. “If I were contemplating, let’s say, getting a mortgage and the rates are higher now and I decide I probably better wait, that slows the demand for houses.”
In a statement, the Federal Reserve said the rate hike was motivated by the war in Ukraine and inflation.
“The implications for the U.S. economy are highly uncertain. But in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity,” the Federal Reserve said.
But despite economic uncertainty and the rate hike itself, Stewart said Utah’s economy serves as a kind of buffer and that people living in Utah were better off than people living in other states as a result.
“[We’re] probably better [off] than the average American,” he said. “We live in a state that has been fortunate for a lot of ways.”
Though that may be the case for now, Stewart recommends keeping an eye on expenditures and avoid overspending. And although the rate hike is not steep, he says the Federal Reserve will incrementally keep raising rates so as to not adversely affect consumers and the economy by having one significant rate hike.
Prices generally won’t be affected for a while according to Stewart. He projects up to possibly 18 months before the rate hike affects prices. However, when it comes to gas and rent, it’s a different story.
“The reason inflation is higher right now is mostly because of the supply side,” Stewart said. “The lack of supply of things like homes, gas, computer chips that go in cars.”
By conserving how much a person spends on gas or puts off either buying a house or finding an apartment to rent, again, it slows demand down which will then lower prices.