Federal Reserve raises interest rates to slow U.S. economy

If you're looking to borrow money anytime soon -- it’ll cost you more to pay it back. The Federal Reserve just raised interest rates a half a percent.
Published: May. 4, 2022 at 7:23 PM CDT
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NASHVILLE, Tenn. (WSMV) - If you are looking to borrow money anytime soon, it will cost you more to pay it back.

The Federal Reserve just raised interest rates 0.5%, an attempt to tap the brakes on the U.S. economy.

“Generally, the Federal Reserve is tightening interest rates to tap the brakes on the U.S. economy and slow it down. As a result, we’ll probably see other lending rates go up and that will make it more expensive for people to buy a home, buy cars, really anything that involved borrowing money,” Andy Borchers, a professor at the Lipscomb College of Business: Management, Entrepreneurship & Marketing, said.

It’s the largest increase over the last 22 years.

Borchers said the move will impact people in the marketplace, especially first-time homeowners.

“For first-time home buyers interest rates are going up making it more expensive for them to borrow,” Borchers said. “We may see some softening on the demand side so there might be more availability of homes, but it’s still going to be difficult for first-time buyers.”

Andrew Kardenetz is trying to get his dream home in Nashville.

“The rates are going to go up and they type of houses that we’re looking at, the prices aren’t really going to go down,” Kardenetz said.

The Reserve’s recent hike is encouraging him to make their big purchase as soon as possible.

“We had to put about 8% over asking price on an already expensive house,” Kardenetz said.

So how will this impact consumers at the gas pumps and grocery stores?

The Federal Reserve’s goal is to lessen the desire to spend by raising interest rates which will create a lower demand that will in turn lower prices.

The challenges lie with balancing of the demand and supply.

“The Fed’s ability to manage the demand side but the supply chain being the totally uncertain part where you simply don’t know what’s going to happen with lockdowns with goods being shipped from various parts of the world, that’s the part that’s very uncertain,” Borchers said.

Some investors believe the Federal Reserve will increase rates multiple times in the future.

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