The Fed just raised interest rates to a 16-year high, the 9th increase in ~1 year

Jerome Powell says more rate increases "may be appropriate" The FOMC doesn't see any rate cuts this year

I've worked 15 years in finance so let me explain what this means & 5 ways it affects you:

T.me/TradingHeights

A) This will slow economic activity as it increases rates for credit cards, adjustable-rate mortgages, and other loans.

B) Instability in the banking sector will lead to tighter credit conditions for households & businesses, affecting economic activity, hiring, and inflation.

C) The collapse of Silicon Valley & Signature banks will lead to conservative lending by mid-sized and small banks, potentially reducing business spending and making it harder for consumers to obtain loans.

D) This slowdown in lending will tip the economy into a recession.

1) Consumer spending: As borrowing becomes more expensive, consumers cut back on spending, particularly on big-ticket items like cars and homes. This reduced spending slows economic growth and leads to a recession if the decline in spending is widespread.

2) Borrowing costs: When interest rates rise, the cost of borrowing increases for both businesses & consumers. This leads to reduced spending on goods & services, as well as decreased investments by businesses. This slows economic growth and leads to a recession.

3) Asset prices: Rising rates can lead to declines in asset prices, such as stocks and real estate, as the cost of borrowing increases and the attractiveness of alternative investments grow.

This negatively impacts consumer & business confidence, leading to reduced spending.

4) Debt servicing: With higher interest rates, individuals and businesses with variable-rate loans face higher debt servicing costs. This can lead to financial stress, defaults, and bankruptcies, which can negatively impact the economy.

5) Recessions: Higher interest rates can cause a recession if they lead to widespread declines in consumer and business spending, investment, and confidence.

I predict slower economic growth in 2023, a “soft landing” is unlikely.