BANKING
MONEY Here’s how the interest rate hikes impact your personal finances By MICHAEL GOSSIE
I
t’s an announcement that makes many people shudder. The Federal Reserve raised interest rates twice this year and Fed Chairman Jerome Powell has indicated that two more increases could be on the way, which could have an indirect impact on the prices you pay at when you fill up your car, get groceries or go out to dinner. “Interest rate hikes trickle down to consumer spending habits,” says Joel Johnson, FirstBank’s president for the East Valley. “When the Fed decreases rates, the goal is to get people to spend more. When the Fed increases rates, the opposite happens. Folks spend less since they have less disposable income and more money is going towards interest, and that can have a ripple effect on local businesses and retailers. The positive thing about higher rates is they can help slow inflation, normalize or bring down costs and provide consumers higher credit deposit rates, enabling them to save more.” Here’s the underlying good news about the rate increases, according to Matt Gilbreath, senior vice president and regional manager at Alliance Bank: the Fed’s increases are due to the strength of the economy – unemployment is at historic lows and most sectors are enjoying strong growth and earnings. The Fed has indicated they will increase rates from historic lows back to something a bit more normal due to the economy not only regaining it’s footing, but really heating up.
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AB | September - October 2018
“This is a balancing act for the Fed as they don’t want to raise rates too fast or too high that it has a negative effect,” Gilbreath says, “but they do want to keep a lid on inflation and get things back to a level that’s in line with a strong economy.” While the Fed’s moves show confidence in the economy, many consumers are still left to ask, “how will these interest rate hikes impact my money?”
“There is good news and not-so-good news for consumers,” says Kim Dees, senior vice president and Southern Arizona retail division manager for Washington Federal. “The good news is those working to build their savings will see higher rates, which will help achieve those savings goals. The other side of the rate hikes for consumers is the cost of borrowing funds is rising.”