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Why Americans shouldn't panic as Fed hikes interest rates: finance experts
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Leroy N. Soetoro
Sep 25, 2022, 4:48:08 PM9/25/22
to
https://nypost.com/2022/09/21/why-americans-shouldnt-panic-as-fed-hikes-
interest-rates-finance-experts/
Americans should stay calm, bolster their personal savings and keep an eye
on their long-term financial plan as the Federal Reserve sharply hikes
interest rates, personal finance experts told The Post.
The Fed hiked its benchmark interest rate by 0.75% on Wednesday for the
third consecutive month. By raising interest rates, the Fed is making it
more expensive to borrow money — a policy move that lowers inflation by
cooling spending.
Fed interest rate hikes reverberate through the US economy, impacting
credit card interest rates, auto loans, savings accounts and hampering the
buying power of ordinary Americans.
They also have an indirect effect on mortgage rates, which have increased
more than 3% since the start of the year to more than 6% for a long-term
contract.
Despite the difficult conditions, households can make some common-sense
moves to maintain a solid short-term and long-term budget, the personal
finance experts said.
“Don’t panic,” said Jacob Channel, a senior economist at LendingTree.
“What you absolutely shouldn’t do in a period like this is panic and think
the sky is falling. If you do that, you’re more likely to make risky
decisions like panic-selling all of your stocks or rushing into a bad real
estate deal.”
To start, Americans should focus on “paying down high-cost debt and
boosting emergency savings,” according to Greg McBride, chief financial
analyst at Bankrate.
“As many learned during the pandemic, nothing helps bridge a period of
income disruption like having money tucked away for a rainy day,” McBride
said. “Now is the time to be boosting that emergency savings to put you on
more solid footing for whatever may lie ahead for the economy.”
Budget-conscious Americans should focus on “protection strategies” for
their finances in the present economic environment, according to Kelly
LaVigne, vice president of consumer insights at Allianz Life. That
includes cutting down on unnecessary purchases, even if items are
discounted by retailers desperate to clear inventory.
“If we can avoid that, especially if you’re buying on credit, you’re going
to be charged more in interest than you’ve actually saved on the
purchase,” LaVigne said. “You’ve got to be careful not to spend too much
on the items that you don’t absolutely positively need.”
Higher borrowing costs add to the pain for Americans during a period of
high inflation. Prices ran at a hotter-than-expected 8.3% in August, with
food and shelter costs hovering at their highest level in decades even as
gas prices declined from record highs.
Fed Chair Jerome Powell has personally acknowledged that the central bank
will keep hiking rates until inflation meaningfully declines — even if
that means “some pain” for American households.
Aside from boosting their liquid cash holdings as much as possible,
consumers should seek “safe havens” for their money in the form of
federally insured savings accounts and government-backed bonds.
Yields on two-year Treasury notes topped 4% ahead of the Fed’s
announcement.
“Government-backed bonds are always a good option in a period of time when
the economy is a little bit shaky and maybe a downturn is on the horizon,
just because they provide such a safe return on investment over a given
period of time,” said Channel.
Precious metals such as silver and gold, traditionally seen as a hedge
against economic volatility, are also “usually decent long-term
investments,” according to Channel.
The housing market is a more troubling proposition. Prospective buyers are
facing the dual crunch of higher mortgage rates and still-high listing
prices, while would-be sellers are confronting dwindling demand and the
need to secure their own new mortgage when rates are at a 14-year high.
The overall housing market is in better shape than it was during the Great
Recession — with far fewer homeowners possessing “underwater” mortgages
with balances that exceed the values of their homes. Still, buying
activity is likely to remain muted as the Fed hikes rates.
“This is not a great time to buy a house because of the high home prices,
the high mortgage rates and still fairly limited inventory to choose
from,” said McBride. “I think that environment for homebuyers will get
better, but it will probably take a weaker economy to do that.”
While cash savings are an important element of preparations, experts
stressed that Americans shouldn’t lose sight of their long-term savings
plans just because the market is struggling.
Consumers should avoid the temptation to dip into retirement savings and
continue making their normal contributions to 401(k) and IRA plans.
“Don’t be pulling Social Security just because it’s there and it could
help you over this short-term hardship,” said LaVigne. “If you absolutely
positively need the money, if you’re 62 or older, certainly you’re going
to have to claim that benefit, but we have to look at the long term for
things like Social Security. You don’t want to change your plan just
because of a short-term event.”
Investors should also avoid fire sales of their stock holdings as the
market slumps — and even look for buying opportunities with staple
corporate names that have become cheap.
“It’s the discipline of continuing to contribute and hanging on through
the rough patches that rewards patient and disciplined investors over
time,” said McBride.
“Don’t bail on your investments,” he added. “Don’t succumb to the knee-
jerk reaction of selling in the face of volatile markets thinking you’re
going to get back in later at a better time.”
Comments:
Retired NYPD
21 September, 2022
How can anyone living paycheck to paycheck make a budget? Electric rates
are expected to rise 60% over the winter after rising 100% this summer.
Gasoline will be going up as soon as the election is over. The national
reserve will be gone and the federal/state/local gas taxes will be back.
Food prices will reflect those increases. Next summer the crops are not
coming in because farmers can't afford to buy fertilizer. All because of
our "transition" to fossil fuels. Seems like they planned a population
reduction to drop the overall carbon footprint. People will die from all
these shortages of basic living needs.
Joe Silva
22 September, 2022
Biden’s “incredible transition” was obviously AWAY from fossil fuels, not
the reverse.
jim Graf
22 September, 2022
That`s the plan.
--
"LOCKDOWN", left-wing COVID fearmongering. 95% of COVID infections
recover with no after effects.
No collusion - Special Counsel Robert Swan Mueller III, March 2019.
Officially made Nancy Pelosi a two-time impeachment loser.
Donald J. Trump, cheated out of a second term by fraudulent "mail-in"
ballots. Report voter fraud: sf.n...@mail.house.gov
Thank you for cleaning up the disaster of the 2008-2017 Obama / Biden
fiasco, President Trump.
Under Barack Obama's leadership, the United States of America became the
The World According To Garp. Obama sold out heterosexuals for Hollywood
queer liberal democrat donors.
President Trump boosted the economy, reduced illegal invasions, appointed
dozens of judges and three SCOTUS justices.
interest-rates-finance-experts/
Americans should stay calm, bolster their personal savings and keep an eye
on their long-term financial plan as the Federal Reserve sharply hikes
interest rates, personal finance experts told The Post.
The Fed hiked its benchmark interest rate by 0.75% on Wednesday for the
third consecutive month. By raising interest rates, the Fed is making it
more expensive to borrow money — a policy move that lowers inflation by
cooling spending.
Fed interest rate hikes reverberate through the US economy, impacting
credit card interest rates, auto loans, savings accounts and hampering the
buying power of ordinary Americans.
They also have an indirect effect on mortgage rates, which have increased
more than 3% since the start of the year to more than 6% for a long-term
contract.
Despite the difficult conditions, households can make some common-sense
moves to maintain a solid short-term and long-term budget, the personal
finance experts said.
“Don’t panic,” said Jacob Channel, a senior economist at LendingTree.
“What you absolutely shouldn’t do in a period like this is panic and think
the sky is falling. If you do that, you’re more likely to make risky
decisions like panic-selling all of your stocks or rushing into a bad real
estate deal.”
To start, Americans should focus on “paying down high-cost debt and
boosting emergency savings,” according to Greg McBride, chief financial
analyst at Bankrate.
“As many learned during the pandemic, nothing helps bridge a period of
income disruption like having money tucked away for a rainy day,” McBride
said. “Now is the time to be boosting that emergency savings to put you on
more solid footing for whatever may lie ahead for the economy.”
Budget-conscious Americans should focus on “protection strategies” for
their finances in the present economic environment, according to Kelly
LaVigne, vice president of consumer insights at Allianz Life. That
includes cutting down on unnecessary purchases, even if items are
discounted by retailers desperate to clear inventory.
“If we can avoid that, especially if you’re buying on credit, you’re going
to be charged more in interest than you’ve actually saved on the
purchase,” LaVigne said. “You’ve got to be careful not to spend too much
on the items that you don’t absolutely positively need.”
Higher borrowing costs add to the pain for Americans during a period of
high inflation. Prices ran at a hotter-than-expected 8.3% in August, with
food and shelter costs hovering at their highest level in decades even as
gas prices declined from record highs.
Fed Chair Jerome Powell has personally acknowledged that the central bank
will keep hiking rates until inflation meaningfully declines — even if
that means “some pain” for American households.
Aside from boosting their liquid cash holdings as much as possible,
consumers should seek “safe havens” for their money in the form of
federally insured savings accounts and government-backed bonds.
Yields on two-year Treasury notes topped 4% ahead of the Fed’s
announcement.
“Government-backed bonds are always a good option in a period of time when
the economy is a little bit shaky and maybe a downturn is on the horizon,
just because they provide such a safe return on investment over a given
period of time,” said Channel.
Precious metals such as silver and gold, traditionally seen as a hedge
against economic volatility, are also “usually decent long-term
investments,” according to Channel.
The housing market is a more troubling proposition. Prospective buyers are
facing the dual crunch of higher mortgage rates and still-high listing
prices, while would-be sellers are confronting dwindling demand and the
need to secure their own new mortgage when rates are at a 14-year high.
The overall housing market is in better shape than it was during the Great
Recession — with far fewer homeowners possessing “underwater” mortgages
with balances that exceed the values of their homes. Still, buying
activity is likely to remain muted as the Fed hikes rates.
“This is not a great time to buy a house because of the high home prices,
the high mortgage rates and still fairly limited inventory to choose
from,” said McBride. “I think that environment for homebuyers will get
better, but it will probably take a weaker economy to do that.”
While cash savings are an important element of preparations, experts
stressed that Americans shouldn’t lose sight of their long-term savings
plans just because the market is struggling.
Consumers should avoid the temptation to dip into retirement savings and
continue making their normal contributions to 401(k) and IRA plans.
“Don’t be pulling Social Security just because it’s there and it could
help you over this short-term hardship,” said LaVigne. “If you absolutely
positively need the money, if you’re 62 or older, certainly you’re going
to have to claim that benefit, but we have to look at the long term for
things like Social Security. You don’t want to change your plan just
because of a short-term event.”
Investors should also avoid fire sales of their stock holdings as the
market slumps — and even look for buying opportunities with staple
corporate names that have become cheap.
“It’s the discipline of continuing to contribute and hanging on through
the rough patches that rewards patient and disciplined investors over
time,” said McBride.
“Don’t bail on your investments,” he added. “Don’t succumb to the knee-
jerk reaction of selling in the face of volatile markets thinking you’re
going to get back in later at a better time.”
Comments:
Retired NYPD
21 September, 2022
How can anyone living paycheck to paycheck make a budget? Electric rates
are expected to rise 60% over the winter after rising 100% this summer.
Gasoline will be going up as soon as the election is over. The national
reserve will be gone and the federal/state/local gas taxes will be back.
Food prices will reflect those increases. Next summer the crops are not
coming in because farmers can't afford to buy fertilizer. All because of
our "transition" to fossil fuels. Seems like they planned a population
reduction to drop the overall carbon footprint. People will die from all
these shortages of basic living needs.
Joe Silva
22 September, 2022
Biden’s “incredible transition” was obviously AWAY from fossil fuels, not
the reverse.
jim Graf
22 September, 2022
That`s the plan.
--
"LOCKDOWN", left-wing COVID fearmongering. 95% of COVID infections
recover with no after effects.
No collusion - Special Counsel Robert Swan Mueller III, March 2019.
Officially made Nancy Pelosi a two-time impeachment loser.
Donald J. Trump, cheated out of a second term by fraudulent "mail-in"
ballots. Report voter fraud: sf.n...@mail.house.gov
Thank you for cleaning up the disaster of the 2008-2017 Obama / Biden
fiasco, President Trump.
Under Barack Obama's leadership, the United States of America became the
The World According To Garp. Obama sold out heterosexuals for Hollywood
queer liberal democrat donors.
President Trump boosted the economy, reduced illegal invasions, appointed
dozens of judges and three SCOTUS justices.
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