Waco, TX (FOX 44) — The Federal Reserve hiked interest rates by .25% this week amid failures in the banking sector.
It’s the 9th consecutive rake-hike since March of last year.
Economist Ray Perryman from the Perryman group says the interest rate hike shows the fight on inflation is ongoing, but it lets people know rates were raised to suggest there are no problems in the banking sector.
“People who lived through 2008 saw the systematic issues with housing and that type of thing, so it makes people a bit skittish,” said Perryman. “The Fed Reserve has to be cognizant of that as they move forward and they assure people there’s no problems.”
Perryman says the Federal Reserve had initial plans to raise the interest rate by half a point.
As Silicon Valley Bank and Signature Bank faced issues, the reserve lowered it to a quarter so consumers don’t panic.
“People get nervous about things like banks failing. If you look at these two banks, they fail for very specific reasons that have nothing to do with the overall economy, and they’re not indicative of any type of widespread banking failures or anything like that,” said Perryman.
A&M – Central Texas economist Dr. Rob Tennant says the federal reserve’s next quarter review to determine interest rates depends on stability in the banks, and if inflation continues to go down.
If you looked over the last few months, you would notice that the consumer price index number gone down,” said Tennant. “What that really means to us is that prices are still going up. They’re just not going up as fast as they were.”
The inflation rate went from 9 to now 6%.
Tennant says we can see a slower rise in consumer costs as the high interest rates meet inflation where it’s at.
“If you’re buying a house or a car and interest rates are higher, less people will buy cars or houses because they can’t afford to buy expensive of a house or car,” said Tennant. “Prices have to come down.”
Before this happens Perryman predicts we may see two more interest rate increases.
The Federal Reserves goal is for inflation to be at 2%.
Dr. Tennant is unsure when we’ll reach this goal.