Financial Adviser Says Higher Interest Rates Shouldn’t be a Concern

The Federal Reserve announced their fourth interest rate increase of 2018 Wednesday to a range of 2.25 to 2.5.

Raymond James Financial Adviser Chris Cravens says the increase shouldn’t be a cause for concern as the Fed looks to limit the amount of increases in 2019.

“The reason [The Fed] also said that they’ve lowered the amount they’re going to raise next year is because they’re starting to see the economy is starting to cool off a little bit, and there should be no threat of inflation,” Cravens says. “They definitely don’t want to raise the Fed funds too fast and too far. They’re pretty much in line where they need to be. I would not be surprised if we get int on ext year and they may not raise at all.”

Cravens says the rates that will matter the most in the long-run will be the 10-Year Treasury. The Treasury rate has decreased by nearly four-tenths of a percent since late October.

“That’s kind of the benchmark for interest rates in general,” Cravens says. “About a month or month and a half ago, the 10 Year Treasury was sitting at about 3.25 percent. Right now, it’s come all the way back down to 2.8 percent which is a huge move in that short amount of time.”

Cravens says he doesn’t expect rates to drastically change anytime soon, meaning more consistency within the market.

“We don’t see any dramatic rises or falls in interest rates in general,” Cravens says. “Any time the Fed starts slowing down, that means they think the economy is growing at just about the right pace, it’s not inflationary, and that suggests that interest rates in general should stay fairly stable for the foreseeable future.”

Cravens says having the Treasury rate continue to fall in addition to slower and less-frequent interest rate hikes means positive outcomes for the consumer.

“For individuals that are wanting to buy a house on a 10-year, 15-year, or even 30-year fixed conventional mortgage, as you can see over the past month or so, rates have dropped,” Cravens says, “So even though they’ve increased the Fed fund, the ultimate result of that is that the 10 Year Treasury and mortgage rates have actually dropped.”

The Fed announced two additional hikes are likely to occur at some point in 2019, down from the previous three increases previously projected.