Chapel Hill Economist weighs in ahead of Federal Reserve's interest rate move

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Monday, March 20, 2023
Economist weighs in ahead of Federal Reserve interest rate move
Federal Reserve to decide on interest rate hike or not this week. This comes during series of high-profile bank closures and government rescues.

The Federal Reserve is meeting this week to decide whether to raise interest rates again and if so by how much.

Their announcement will come Wednesday during a difficult time for the financial system. In the last few weeks, there have been a series of high-profile bank closures and government rescues.

Many economists are now working to predict what move the feds will make, including Chapel Hill Economist, Dr. Eugene Flood.

Flood says he believes the feds will be vigilant on growth and curbing inflation but will have to slow rate hikes to create stability in the banking system. Flood believes the priority will be to provide liquidity to the banking system by making capital available to banks so people won't panic. He says it is also to avoid a run on banks as we saw recently with the collapse of Silicon Valley Bank.

Flood says for consumers-this will move can also make banks more cautious when lending money.

"Banks are going to be more cautious with that that do with the money that is there," Flood explained. "And, so, they're going to make it harder for people and businesses to get loans. So, you may need a higher FICO score or you may need to get a bigger down payment. You're going to see somewhat softer pricing but more difficult terms. And, that's the important point. It's going to be harder to get a mortgage or car loan or credit card going forward."

Flood believes slowing rate hikes plus the high amount of tension in the economic system increases the likelihood of a recession.


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