Large purchases could suffer from the Fed’s interest rate hike

The Federal Reserve on Wednesday raised its benchmark interest rate by half a percentage point in an effort to rein in inflation, which is at its highest level in four decades. This is the biggest move in the benchmark rate since 2000.| RELATED: The Fed raises its key rate by half a point in an effort to control inflation. Think of it as a delicate dance: the Federal Reserve must destroy inflation without killing the economy. According to economists, the best way to do this is to raise interest rates. Economists said the increase is necessary to reduce inflation and there will be both positive and negative effects. While people’s savings account could benefit, rising rates could make it even more difficult to buy a house or a big ticket item, like a car. “A lot of people will consider it bad because it hurts the economy. Some people consider it good because they will generate more income in their wallet. But ultimately it is something necessary,” said economist Anirban Basu, who is CEO of Sage Policy Group.| RELATED: US inflation jumped 8.5% last year, its highest level since 1981Basu told 11 News that inflation is currently above 8% and the Fed needs to bring it closer to 2 %. It’s a tough sell, given soaring food and fuel prices, but it has to be done for the long-term benefits.”None of this is really good for the consumer. Nonetheless, the Reserve federal government has a mandate to try to get inflation under control,” Basu said. “It’s definitely not under control right now. Their main instrument to do that is to raise interest rates, and so they raise interest rates whether we like it or not.” It’s been an uphill battle for those trying to buy a home, and now rising rates could add to that fight.According to Freddie Mac, the average 30-year mortgage is now 5.27%, about a tenth of a percent higher than last week and more than 2% lower. more than last year | RELATED: Mortgage rates hit their highest level since 2009, real estate agent Ashley Richardson tells 11 News that higher rates will initially bring more people to the table to get the best rate your house now and you lock in a rate, then your housing costs are fixed,” Richardson said. But she expects to see a drop. “We still have a lot of buyers in the queue and still a shortage of inventory,” Richardson mentioned. “Still expect to continue with the low inventory, so rather than having eight and 10 offers on a property when it comes on the market, we might only see two or three offers, which of course , improves the chances of the buyer.” Video below: With mortgage rates and house prices on the rise, what can a buyer do? Then there is the question of what to do with the savings. Financial planner Brian Kroneberger, chief investment officer at RBC Wealth Management, told 11 News that in the short term, money market accounts should be the best, safest bet. involved in the stock market, finally they’re going to get some relief,” Kroneberger said. A few more tips: try to get your credit cards paid off and maybe consider delaying major purchases. Economists estimate that the Fed will continue to raise rates until the end of this year.

The Federal Reserve on Wednesday raised its benchmark interest rate by half a percentage point in an effort to rein in inflation, which is at its highest level in four decades. This is the biggest move in the benchmark rate since 2000.

| RELATED: The Fed raises its key rate by half a point to control inflation

Think of it as a delicate dance: the Federal Reserve must destroy inflation without killing the economy. According to economists, the best way to do this is to raise interest rates.

Economists said the increase is necessary to reduce inflation and there will be both positive and negative effects. While people’s savings account could benefit, rising rates could make it even more difficult to buy a house or a big ticket item, like a car.

“A lot of people will consider it bad because it hurts the economy. Some people consider it good because they will generate more income in their wallet. But ultimately it is something necessary,” said economist Anirban Basu, who is CEO of Sage Policy Group.

| RELATED: US inflation jumped 8.5% last year, its highest level since 1981

Basu told 11 News that inflation is currently above 8% and the Fed needs to bring it back closer to 2%. It’s a tough sell, given soaring food and fuel prices, but it needs to be done for the long-term benefits.

“None of this is really good for the consumer. Still, the Federal Reserve has a mandate to try to get inflation under control,” Basu said. “It’s certainly not under control right now. Their main instrument to do that is to raise interest rates, and so they’re raising interest rates whether we like it or not.”

It’s been an uphill battle for those trying to buy a home, and now rising rates could add to that fight. According to Freddie Mac, the average 30-year mortgage is now 5.27%, about a tenth of a percent higher than last week and more than 2% higher than a year ago.

| RELATED: Mortgage rates at their highest since 2009

Realtor Ashley Richardson told 11 News that higher rates would initially bring more people to the table to secure the best rate.

“Locking in a (rate) right now is a really good inflation hedge if you get your house now and lock in a rate, then your housing costs are fixed,” Richardson said.

But she expects to see a decline.

“We still have a lot of buyers in the queue and still the shortage of inventory,” Richardson said. “Still expect to continue with the low inventory, so rather than having eight and 10 offers on a property when it comes on the market, we might only see two or three offers, which of course , improves the chances of the buyer.”

Video below: With mortgage rates and house prices rising, what can a buyer do?

Then there is the question of what to do with the savings. Financial planner Brian Kroneberger, chief investment officer at RBC Wealth Management, told 11 News that in the short term, money market accounts should be the best, safest bet.

“I think, at least from a savers perspective, for people who aren’t involved in the stock market, they’re finally going to get some relief,” Kroneberger said.

A few more tips: Try to get your credit cards paid off and maybe consider delaying major purchases.

Economists estimate that the Fed will continue to raise rates until the end of this year.

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