CEDARVILLE — Interest rates have now been increased for the eighth straight time.
The Federal Reserve, in its first meeting of the new year, increased interest rates by 0.25% today.
News Center 7′s Xavier Hershovitz talked with a local expert on this increase and how it will affect the economy.
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“Root of these rate hikes to battle inflation, connect back to covid,” said Dr. Jeff Haymond, Dean of the Business School and economics professor at Cedarville University.
“We’re in this situation because of poor policy choices that the federal government did long after the covid crisis was over. I’m actually pretty pleased with what the fed has done in the last 6 months. That said, it’s cleaning up a big mess they created and leading us to not so good options either way,” said Haymond
However, Haymond believes this will not be the last rate hike we will see, and we should expect them to keep going up.
Anyone wanting to borrow money, it will become more expensive to do so with the rate increase. This means that there will be higher interest rates for new car purchases, purchases made with a credit card, and mortgages. However, for anyone who has money saved, this could mean good news.
“You’ll finally start getting a little hint of a return in a money market account,” said Haymond.
Everyone is feeling the effects of inflation. The way for the situation to become less impactful to our wallets is for the rate increases to happen.
“It would be far worse to just have this inflationary spiral continue for a decade. I would much rather have a recession, even if it’s a somewhat nasty one, rather than go through that,” said Haymond.
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The new year is only two months in, and the Miami Valley has already experience area businesses laying off workers. Most recently, Silfex, the closure of Beavercreek’s Melt, and Mikesell’s. However, Haymond says this does not automatically mean we are in a recession.
“The fed is already doing all the right things to get inflation under control, but as they do it companies that took on too much debt early. Now it’s going to be very difficult for them to service debt at higher rates, it’s going to curtail a lot of activity. Probably lead to a recession, doesn’t need to be a severe one and it doesn’t mean we’ll inevitably have one,” said Haymond.