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Financial advisor explains the impact of the Federal Reserve’s rate hike

Financial advisor explains the impact of the Federal Reserve’s rate hike
Posted at 10:38 PM, May 04, 2022
and last updated 2022-05-04 22:38:56-04

RICHMOND, Va. -- The Federal Reserve boosted a key interest rate a half-percentage point Wednesday, signaling its intent to curb inflation which has sent prices climbing at their fastest pace in 40 years for months now.

It is the Fed's biggest move since 2000.

Jamie Cox, the Managing Partner of the Harris Financial Group, discussed the impact on your house or car purchase and your investments.

The Fed says it's concerned about inflation from supply chain issues, ranging from the pandemic and now with lockdowns imposed by China to stem a surge in Covid cases. The Russian invasion of Ukraine and the hot labor market have also added to the pressure. Cox explained the two tools the Fed has to slow or stop inflation: rate hikes and the unwinding of its nine trillion-dollar asset portfolio.

Cox pointed out that the rate hike, which affects the “overnight lending rate,” will take some time to impact your credit card or a new house or car payment. But it will impact those eventually.

He also discussed why Wall Street reacted with "euphoria" after the announcement. He said the market had already built in an even larger rate hike, so when it was “only” a half-point, the market shot up.

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