With inflation a major concern for both consumers and businesses, financial experts said it was only a matter of time before the Federal Reserve (Fed) hiked interest rates. That prediction came true last week when the Fed approved a 0.25 percentage point hike in interest rates , the first hike since December 2018, CNBC reported.
The increase will correspond to an increase in the federal funds rate and will directly result in higher funding costs for many forms of borrowing and borrowing. In addition to the current rate hikes, the Federal Open Market Committee is also forecasting rate hikes at each of the remaining six meetings this year, reaching a consensus funding rate of 1.9% by the end of the year. The committee expects three more increases in 2023, then none in the following year.
The committee also raised its inflation estimates and forecast that the price index for personal consumption spending excluding food and energy will reflect growth of 4.1% this year, compared with a forecast of 2.7% in December 2021." Inflation remains high owing to a pandemic. associated supply and demand imbalances, rising energy prices and broader pricing pressures," the committee said in a statement.
Businesses with outstanding loans could soon raise their interest rates depending on the type of loans they have. Fintech firm NAV offers the following tips to help small businesses weather rising interest rates:
- Get financing as soon as possible because waiting too long could mean settling for more expensive financing or possibly not qualifying at all.
- Pay off high-interest credit card debt whenever possible, or refinance with a low-interest credit card balance transfer or term loan.
- Consider refinancing an adjustable rate loan with a fixed rate loan
- Focus on financial health, as the lowest interest rates often go to financially healthy borrowers.
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