Fed Hints at Slowing Interest Rate Hikes: What It Means for Your Financial Planning Strategies

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With the current state of the US economy, the Federal Reserve’s announcements about interest rate hikes have been closely monitored. Whether or not the Federal Reserve decides to continually increase the rates, and the amount in which they raise the rates gives us an indication of what their impression is of future inflationary issues in the economy. Additionally, analyzing the expected increases in the interest rates versus the actual rate hikes plays a tremendous factor in how the markets react, especially here in the US.

With recent hints being dropped by officials at the Federal Reserve that they may slow down interest rate hikes, what does that likely indicate for the future health of the US economy and what will it mean for your financial planning strategy adjustments?

At ARQ Wealth, based in Scottsdale, AZ, we have been providing customized financial and retirement planning for decades to our clients to help them meet their unique challenges and needs. We will provide a quick breakdown of what the slowing down of rate hike means practically speaking for you and your financial planning.

Why Would the Fed Slow Down Interest Rate Hikes?

The recent increases in the federal interest rate reflect changes in the economy over the past several years. Throughout the 2010s, the economy showed slow but steady improvement after the financial collapse of 2008-2009. In 2020, the outbreak of the pandemic sparked a new economic crisis prompted by lockdowns, travel restrictions, and skyrocketing unemployment.

In 2020 and 2021, the federal government, including the Federal Reserve, took steps to stimulate the economy. One of these measures included slashing the federal funds rate, making it easier for people and businesses to borrow money during a crisis. 

However, supply shortages and increased consumer demand brought about a sharp increase in inflation. Increases in food, energy, and housing prices hit Americans just as they struggled to overcome the effects of the COVID-19 pandemic.

Recently, the Fed has been dramatically increasing interest rates to curb inflation but as inflation numbers have seemed to even off at the current levels, they are considering slowing down those interest rate hikes.

What Would a Slowdown in Rate Hikes Indicate?

The potential slowdown in rate hikes would indicate that the Federal Reserve still considers inflation a serious concern, but not as dire as it was in the second half of 2022. This gives some cause to hope that the current inflationary pressures on the economy might be easing. The Fed is trying to balance raising the interest rates enough to lower levels of inflation across the US but not raise the interest rates too much and risk putting the economy into a recession in 2023 and beyond.

Planning for Changes in Uncertain Financial Times with an Experienced Financial Advisor

In turbulent economic times, investors often have more than one course of action. The Fed continuing to raise rates suggests continued concern over inflation and an overheating economy. However, a low unemployment rate and slowing inflation represent hopeful indicators that the Fed might not see the need for steep hikes in the future.

Investors might expect the market to be sluggish for a while as it deals with continued interest rate hikes, but they could watch for bargains in the coming months.

While every retirement and financial plan is unique and different, there are best practices that can help during uncertain financial times. It may be a good idea to ensure that you have a rainy-day fund and having savings for your expenses to cover you for 6+ months on the off chance there is a dramatic change to your income. Additionally, it may mean that it could be better to put down more money towards a property or a house (if you are able to) to avoid the increased mortgage rates.   

At the end of the day, the best way to know what the best specific next steps for you and your family would be is to sit down with an experienced financial planning firm such as ARQ Wealth. We currently are offering a no-cost no-obligation financial planning session to go over your unique situation and determine what your best course of action would be to work towards your retirement goals.

Get the peace of mind that you deserve by calling (480) 214-9572 today for a no-cost no-obligation consultation about your retirement plan and financial planning strategy.

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The opinions expressed in this blog post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. It is only intended to provide education about the financial industry. As always, please remember that investing involves risk of loss of principal and capital. ARQ Wealth Advisors, LLC is a registered investment adviser with the U.S. Securities and Exchange Commission. Advisory services are only offered to clients or prospective clients where ARQ Wealth Advisors, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by ARQ Wealth Advisors, LLC unless a client service agreement is in place. Likes and dislikes are not considered an endorsement for our firm.