In March, the Federal Reserve decided to raise interest rates for the first time since the Covid-19 Pandemic began. The timing of the interest rate hike was needed as inflation has grown during the pandemic for many reasons. Some believe inflation is on the brink of running out of control, which has Federal Reserve members, economists, and those who work in the financial industry all making a case for more aggressive interest rate increases in the future.
With inflation above 7%, not many people would argue that interest rates need to increase in order to slow and eventually lower the inflation rate. Higher interest rates lower the number of large purchases consumers will make; think cars and homes. But high-interest rates do a similar thing to businesses; it reduces the amount they are willing to spend or reinvest in their company. These two factors together typically end up pushing the economy into a recession of some sort once and if interest rates slow the economy too much.
Tampering with interest rates is a double edge sword; you go too far in one direction, and inflation grows; too far in the other direction, and you send the economy into a recession. Unfortunately, though, we are at a point where the Fed almost has to raise rates in order to slow inflation to a more reasonable level. Continue reading "ETFs To Invest In When Interest Rates Are Rising"