Interest rate revisions cause a ripple effect throughout the economy. Accordingly, the Federal Reserve’s actions should have moderate influence over financial choices you make in 2023 and beyond.
Savers stand to gain from rising interest rates because they will likely earn a better return on deposits. On the other hand, the cost of borrowing money will likely increase. Mortgages, car loans, and credit cards will demand higher interest rates. That’s not a big deal if you’re already locked into low-interest, fixed-rate loans. But if you have a variable rate loan or carry balances on your credit cards, you may find your monthly payments starting to increase.
On the investment front, different market sectors will have varied responses to interest rate changes. Sectors that are less dependent on discretionary income may be less affected – after all, you need to buy gas, clothes, and groceries regardless of interest rate changes. Staying the course with a well-diversified retirement portfolio is still a prudent strategy. However, you may want to review your investment allocations.
If your company’s balance sheet has variable-rate debt, rising interest rates can affect your bottom line and possibly your plans for growth. As the cost of borrowing increases, taking out loans for new equipment or financing expansion with credit may become less desirable.
Please call if you have questions about deciding on the best response to the current and future changes in interest rates.
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