On Wednesday, Jerome Powell spoke again on behalf of the federal reserve. As many expected, the FED has decided to raise rates another 25 basis points to 4.5 – 4.75%. Although this is the second meeting in which the size increase has gone down it still puts rates at the highest point in over 15 years. During his speech he suggested more rate hikes are to come with every intention of combating inflation while maintaining a strong labor market. However, he mentioned that they are beginning to see signs of deflation. The year end inflation reports show that total PCE rose 5% (excluding volatile food and energy) and Core PCE rose 4.4%. The overall long term goal of the feds is to get this rate down to 2%.

It is likely that there are more hikes to come and based on Powell’s speech it seems that their biggest concern lies with the labor market. There is still a larger labor demand than there are available workers. They will do everything they can to maintain the labor market while also fighting inflation even if that means no rate cuts in 2023. If we start to see a large shift in labor we may see rate cuts sooner.

Three ways this can affect you:

  1. If you have a variable credit card rate you are likely to see a rise. This is an important time to start paying off those high interest variable credit card debts.
  2. If you are looking at refinancing or purchasing a new home mortgage rates are going to remain high. Make sure to consider this as apart of your next real estate investment.
  3. Other loans such as car and student loans will also remain higher. The average 5-year car loan is already up over 2% from this time last year.

If you have any questions or want to discuss how this affects you and your financial situation, give our office a call at (435)773-9444 and schedule a time to talk in more detail.