Financial experts talk about the effect of rising interest rates

TAMPA, Fla. — Interest rates will likely rise next month.

On Wednesday, the Federal Reserve said a quarter-percentage-point hike could come as soon as it tries to deal with rising inflation.

Experts said the first and most important thing about these rising interest rates is not to panic.

“Panic shouldn’t be on anyone’s mind right now. It’s the way the pendulum swings. Right now we’re on one side. It’s about to turn around said Dustin Johnson, president of U-Vest Financial in St. Petersburg.

He said that when the Federal Reserve raises interest rates, it’s because it thinks the economy is actually in a strong position and trying to offset inflation.

“We have a supply shortage. But we also have an increase in demand for people wanting to buy things. These two things together will generate inflation. The Fed comes out and says unemployment is low, US incomes are high. The balance sheets are successful. We need to start raising rates again.

Financial adviser Dave Duquette, founder of Impact Medical Advisors, said when it comes to mortgages and other loans, it might be time to lock in a fixed interest rate.

But even the increases would still be significantly lower than they were.

“If we even look back to 2018, mortgage rates were consistently above 4%. And if we go back to the early 2000s, mortgage rates were between 5% and 7%. So if they get back into the 4% range, that’s still historically very low. So we are certainly spoiled,” Duquette said.

Duquette said interest rate increases would not mean a quick fix for inflation because of the trillions the government has spent to help fight the COVID pandemic.

He said the average person should focus on financial fundamentals, like building an emergency fund.

“Over the long term, it may help them because what we typically see is that savings rates and money market rates will tend to return to normal because they’ve been incredibly low lately,” said Duquette.

While home and car payments will rise for some as interest rates rise, experts said slowing inflation may actually make it easier for people to make those big purchases.

The interest rate hike would be the first since December 2018.

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