TULSA, Okla. — With rising costs for everything, from gas to groceries, the Federal Reserve will try to slow the economy enough to control rising inflation.
The threat of another recession is on the minds of many, especially on Wall Street as we wait for the Reserve's interest rate hike decision.
The Central Bank is expected to announce its first interest rate hike of half-of-a-percent point in more than two decades.
The goal is to slow the economy down enough to control inflation which is at a 40-year high.
The Federal Reserve helped the U.S. economy through the COVID-19 pandemic by dropping interest rates to near zero.
Now, the Reserve is facing a new challenge — crushing inflation without bringing on a recession.
Bill Dudley, former President and CEO of the Federal Reserve Bank of New York, says it's hard to catch up when you have to go very fast, and even harder to catch up when you have to actually push monetary policies to a tight setting.
So, to make the process easier, they are attempting what's being called a "soft landing."
But those with the Reserve say that could be difficult because the job market is so hot right now and increasing interest rates will likely change that.
Since the pandemic began, we're seeing what's being called the "Great Resignation" where thousands of people across the country are leaving their current jobs to work at better-paying jobs.
The unemployment rate in the U.S. is at 3.6%, according to the Bureau of Labor Statistics. In Oklahoma, the unemployment rate is even slightly better — sitting at just 2.7%.
The hope is the strong job market and solid consumer spending would keep a recession from happening and keep the economy from expanding.
However, some analysts are still concerned especially after the gross domestic product report from last week showed the U.S. economy shrank during the first quarter.
But what does all this mean for you?
Greg McBride with Bankrate says you'll feel the latest expected rate hike most directly on variable rate debts, things like credit cards and home equity lines of credit.
"Pay down debt. Debt can really be a more significant burden as interest rates rise and, especially, so if the economy does slow substantially or end up in a recession, the less debt," McBride says, "You have the better you'll be able to weather the unknown from an economic perspective."
While borrowing is going to cost more, your savings will eventually pay more.
McBride says to view your return on your emergency savings, not so much through the lens of the 1% return you're earning. Instead, it will create a buffer between you and 15% credit card debt in the event of unplanned expenses down the road.
He says an online savings account will get you somewhat better returns.
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