TAMPA, Fla. — Interest rates will likely be on the rise next month.
On Wednesday, the Federal Reserve said a quarter-percentage-point increase could happen soon as they try and deal with rising inflation.
Experts said the first and most important thing about those rising interest rates is not to panic.
“Panic should not be in somebody’s mind right now. It’s the way the pendulum swings. Right now we are on one side of it. It’s about to turn back around,” said Dustin Johnson, president of U-Vest Financial in St. Petersburg.
He said when the Federal Reserve increases interest rates it's because they believe the economy is actually in a strong position and trying to offset inflation.
“We have a supply shortage. But we also have an increase of demand of people wanting to buy things. Those two things together are going to generate inflation. The Fed comes out and says low unemployment, American incomes are high. Balance sheets are successful. We need to start raising rates again.”
Financial advisor Dave Duquette, the founder of Impact Medical Advisors, said when it comes to mortgages and other loans it might be a good time to lock in a fixed interest rate.
But even increases would still be significantly less than they were.
“If we look back even to 2018, mortgage rates were routinely over 4%. And if we float back into the early 2000s mortgage rates were between 5%-7%. So if they float back into the 4% range that’s still historically very low. So we certainly are spoiled,” said Duquette.
Duquette said interest rate increases won’t mean a quick fix to inflation because of the trillions the government spent to help with the COVID pandemic.
He said the average person should focus on the financial fundamentals like creating an emergency fund.
“Over the long term that may help them because what we typically see is that savings rates and money market rates will tend to come back up to normal because they’ve been incredibly low lately,” said Duquette.
While home and car payments will go up for some as interest rates rise, experts said the slow down to inflation could actually make it easier for people to make those big purchases.
The interest rate increase would be the first since December 2018.