Amid continued rising global inflation, the Federal Reserve raised the federal funds rate by 75 basis points (bps).
What do you want to know
- The Fed’s 0.75% rate hike brought the benchmark interest rate back to a range of 2.25 to 2.5%.
- July’s rate hike was the second in as many months
- The Federal Reserve will hold its next Federal Open Market Committee meeting in September
The move at July’s Federal Open Market Committee (FOMC) meeting was the second 75-point hike in as many months to curb inflation.
For small businesses like The Soup Shop in Melbourne, that meant any expansion plans they had were on the back burner for now.
Owner Julie Shipley said they considered opening a new store in Palm Bay in 2020, but at the time Shipley said the bank was reluctant to fund a new restaurant at that time.
“Mortgage rates were so much lower then that I don’t know if I want to spend money on this building now because it’s going to cost me a lot more,” Shipley said. “So that definitely slowed down expansion plans.”
Shipley opened her first restaurant in 2009, but said it wasn’t until she completed the mentorship program with weVENTURE that she was able to make the business profitable. She said some of the business acumen she learned there is paying off now that the country finds itself in another tough economic climate.
“They made me think about things in a totally different way. They made me reduce my inventory, which I didn’t like, but they were right and a few other things like that,” Shipley said. “I still use the lessons I learned in this program.”
According to Joe Harris, chief operating officer of Melbourne-based Morgan Financial, one area that has remained fairly stable during the rate hike and is likely to remain so is the housing market.
“Prices are fairly stable. I mean, yeah, we’re seeing some ups and downs, but right now if you’re looking to buy a home and you qualify, there’s actually more options than a year ago,” Harris said.
He said those with existing mortgages who have 30-year fixed-rate loans won’t see an impact on their mortgage from the Fed’s rate hike. Those with an adjustable-rate mortgage, he said, could see their loan adjust up.
Harris said there will be short-term economic difficulties, but in the long term it will be good for the economy.
“In the short term, there will be higher costs for things like credit cards, student loans, car payments, home equity lines of credit, personal loans, which will reduce demand. But again, this is all meant to improve the long term,” Harris said. “When you have the best long-term and there’s more stability, you’re going to see those rates come down a bit.”
The next FOMC meeting will take place on September 20-21.