WHAT’S THE LATEST ON INTEREST RATES?

On Wednesday, the US central bank (the ‘Federal Reserve’) raised its interest rate for an eighth time since March last year. As a result and as history has it, several central banks worldwide, particularly those with their currencies pegged to the US dollar, tracked its move. But it’s not as severe as before.

The latest rate rise wasn’t as aggressive compared to the rate hike in December. Before that, the Fed announced four similarsized rate hikes in a row. The recent hike puts interest rates at the highest level in 15 years, and it’s warranted considering how high inflation has been running hot globally.

While the pace of adjustments is slowing, US signaled only a couple more rate hikes are remaining now, while adding that rates cuts are not to be expected in 2023 since the recent signs of slowing inflation are at an “early stage.”

But what does mean for your finances? Like anything else, there are always two sides to every coin — lower interest rates can be both a boon and curse to those affected. In general, savers and lenders will tend to lose out while borrowers and investors benefit from low interest rates.

The bottom line is knowing whether or not slowing interest rate hikes are a good thing. The gist of the matter is lower rates makes borrowing money cheaper. This encourages consumer and business spending and investment, and can boost asset prices. Lowering rates, however, can also lead to problems such as inflation and liquidity traps, which undermine the effectiveness of low rates.