Inflation Warning: What the Fed’s Next Move Means for Your Money

Well, the news wasn't so good from the feds this week when we talk about interest rates and what we will see and how this will impact us in our pocketbook. So we wanted to spell it out exactly what happened and how this will impact you because it will beginning in the month of December. We have Mickey McGill here, our financial expert. Now, when we talk about the Feds, who are we talking about, and what did they do this week that people should be concerned about? So the Federal Reserve is what you're talking about, and they're looking at inflation. Inflation is rising too high. So in the last year, it's been about 3.7%. They want it around two, and when inflation goes up, it's going to go up. Really high. One of the one of the opportunities they have is to actually raise interest rates. So they're talking about raising interest rates about a quarter of a percent in their next meeting. Now, how does that help with inflation for those who are trying to figure out the algorithm or the math on this one? Right, right. Most definitely. So here's the thing. When you increase borrowing costs. People don't borrow as much. If a house is going to cost an extra $100 or $200 a month, you may not buy that house. So what that does is slow down spending, which brings down prices. That's what they're trying to do. So it's like putting an ice pack on a hot economy. Exactly, exactly. But it's a thin line, right? They don't want to go too far because if they do, then unemployment starts rising and then you have more issues. So it's a dance they have to do and they do it with interest rates. All right. Now let's talk about how this will impact us. We have some information we want. I'm going to put on the screen. This is how you will feel it at home. Let's begin with number one on that list. I can't see it, Mickey. Can you from here? I need new glasses, but I think we'll work out just fine. So credit cards. Credit card is going to be the one that's going to be impacted pretty fast, right? So what ends up happening is you have... Within one to two cycles, your interest rate will rise about a quarter of a percent, right, when they rise at about a quarter percent. So that's one of the big concerns. So one of the things people can do now is start paying down high interest rate credit cards to help and be in preparation when those prices go up. But, I mean, we're talking about next month. Sort of, right, so if they make a choice, December 8th, December 9th is what it is. You have maybe one to two cycles, so you may have anywhere from a month to two to three months to start really working on that. Next on our list, we're talking about mortgages. How will this be impacted? So again, the mortgages aren't directly tied to the Federal Reserve, right? It's more to the 10-year bond rate and all those kind of things. But they actually start raising rates on mortgages before the Fed makes their decision. So you're actually already in that position right now. So you may want to either hold off on buying a house or thinking about when the prices are going to be a little bit more in your range. And next on that list, car loans out there. If you're thinking about buying a new car. Yeah, that's pretty immediate. So as soon as that interest rate changes, if you're buying a new car, it's right there. So, again, may think about if a quarter percent is going to. mean too much car for you may look at doing it now before the interest rates actually change. All right, you got to act quickly. Groceries, which we all can relate to, that's an everyday thing. Most definitely, sometimes if you realize, hey, is my paycheck shrinking? No, it's just your expenses are going up. These last three things, these are the reasons why they're looking at increasing interest rates because grocery prices are outrageous, right? Go try buying a gallon of milk, some eggs, it's a really high thing. This is why they're looking to increase the interest rate so those prices can help start coming down. Now rent. Rent, yeah, so here's what happens, when people are not able to buy homes, rent prices tend to go up because now they're renting higher. This was one of the biggest concerns. Supply and demand. Supply and demand, rents jumped up a significant amount from the previous month, and that's again, it's a big scary thing for the Federal Reserve, that's why they're trying to act quickly. All right, and another one that hits us all, if you live in a house. Gas and electric, and if you have a car. Most definitely, and again, gas prices, this is a good news right now because the blue wave came in, people are looking at, okay, the Iran war may actually end sooner, so oil prices are going down, so gas prices are actually going down for your car. But again, the problem is, is supply and demand. The more people are continually using and spending, the prices are gonna go up. So again, rising inflation, Brings down costs across the board. And once again, those rates likely the beginning of December. Beginning of December. December 8th or 9th is what you're looking at. All right, Mickey, thank you for that valuable advice.