What the Fed’s rate hike means, and what to do about it
On the heels of the Federal Reserve’s Announcement raise interest rates by 0.75%, Certified Financial Planner Michelle Buria stopped by to explain what the rate hike means and what we can do.
Michelle says this started at the beginning of the pandemic when there was a high infusion of cash, “Supply was low, but consumers continued to spend… The Economy was growing fast. Too fast. The economy was running a sprint.” Michelle says the economy’s growth should be paced like a marathon.
Raising interest rates is a tool the Fed can use to stabilize the economy. This is the fifth rate hike this year, and none of them have been as effective as the Fed would like.
CPI, or consumer price index, is used to measured inflation. Gas prices have gone down, but the prices of some of these things like housing and food has gone up. The fed is simply being more aggressive.
“While inflation hasn’t been increasing it hasn’t come down as quickly as the Fed would like,” Michelle says it’s causing them to be more aggressive when it comes to rate hikes.
Michelle recommends paying off your debt, living within your means, and having an emergency fund. Michelle recommends keeping 6 month to a year of funds, at the very least 3 months.