Interest rates are the highest they have been in over 15 years. And, the Federal Reserve raised interest rates by another 0.25% yesterday.
With higher interest rates it means less people and businesses will borrow money. This means there’s less buying of stuff, which can cause the economy to slow down.
So, why is the Federal Reserve doing this?? Mostly to try and lower inflation. With higher interest rates, the demand for buying things goes down and the goal (hope) is that prices stop rising as quickly. Inflation has been staying higher for longer than most “experts” predicted so that has caused the Federal Reserve to continue raising interest rates more than was expected.
For those keeping track at home, the Fed has raised interest rates 63 times and lowered rates 68 times since 1990. It’s an ongoing seesaw depending on how they are trying to influence the economy.
If you are a day trader, this is BIG NEWS. You better have been glued to your desk yesterday and quickly trying to maneuver your portfolio in anticipation of what the Fed was going to do. But this is a fool’s game. It’s a great way to waste a lot of time and lose money.
The better route to take is to be a long term investor. You know how much attention they pay to all of this? ZERO. Interest rates will go way up and way down many times throughout your investing journey. That’s all part of the process. None of this matters to you. The only thing you have to do is keep putting money into low cost index funds.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Vivi & Shane
