FED Up: What can the US Federal Reserve’s Interest Rate Increase Do to You?

Starting from March 2022, the US Federal Reserve has introduced a series of gradual increases in interest rates in a bid to tame hyperinflation that peaked at 8.8% globally. A year on, the Fed announced yet another interest rate hike pegging it at 25 basis point (0.25%). 

This ninth installment of the Fed’s interest rate going up jolted fears that more financial instability may ripple through the world in the months ahead, if not years. Coming at the wake of the banking crisis that saw the rapid meltdown of several US banks – Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank, as well as the bailing out of one of Europe’s longest-serving banks with a 167-year history, Credit Suisse, an inflation battered global economy may have yet to reach rock bottom.

High inflation typically “gets cured” by increasing interest rates to make borrowing more expensive, thereby decreasing the amount of money available for spending. However, the recent bout of inflation has stubbornly resisted such cooling measures. This is because of a mix of long-standing geo-political tensions and environmental issues affecting demand and raw material supplies. The ongoing Russo-Ukrainian war and tensions between US and China disrupted trade flow while the COVID pandemic and climate change disasters are driving up cost of goods This could make matters worse when the inflated prices of daily necessities, such as food, energy and transport are not brought down, yet the financial burden of servicing loans, such as housing, have increased because interest rates have gone up.

Finding Gems Along a Rocky Road

If you think the interest rate hike and its implications are limited only to the US, think again. Economies around the world from Asia to Africa to the Americas to Europe and more (except Turkey) are adopting similar strategies to fight inflation. While results vary depending on a nation’s economic profile, political climate and environmental disposition, one thing is certain – the value of cash has crashed. The composite factors of inflation and their causes have eroded purchasing power while a slowing economy spells job cuts and pay freezes. It could be one long rocky road to global economic recovery with recession on the horizon.

Although economists, financial experts and investment analysts may be split in their speculation of how deep or quick a potential recession may be, the best measure of recession comes from whether you are feeling the pinch of rising cost and have a general sense of diminishing affordability. It is prudent to combat the myriad ways that prices could inflate with multiple sources of income. They could come from working two or three jobs, collecting rental income (if you have idle property), low risk investments and/or personal trading of financial instruments. 

With the current trend of central banks’ prescribing higher interest rates, it might be worthwhile to look into trading. Why? As interest rates change, the currency exchange rate of a country would likely fluctuate as well, thereby unearthing currency pairing gems that may yield significant returns. However, keep in mind that currency exchange rates move fast and can be highly volatile, resulting in potentially quick gains and losses.

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Making Interest Rate Increase and Inflation Work for You

Inflation usually leads to higher interest rates to bring down inflated prices which in turn, could lead to a stronger local currency. For traders in the financial markets, these changes in interest rates can potentially create opportunities for profit while also presenting significant risk. It is therefore important to select a trading platform with a strong track record of reliability and security, plus high-quality analysis and educational materials to help with learning and decision making.

In addition, consider using a trading platform that offers a comprehensive range of financial instruments to choose from, for the flexibility of reacting to and capitalizing on the latest trends and economic events. Other than a wide range of trading options, a platform like Forex4you.com also accepts low minimum deposits and delivers trades with an order execution as fast as 0.1 seconds. These features allow you to better manage risk and ensure fast trade transactions to over 150 tradable instruments (forex, commodities, indices, and stocks). Traders with Forex4you.com can become partners as well to earn attractive and  unlimited commissions. Partners can also look forward to a personal account manager,  marketing support, and invites to exclusive VIP events and activities. Forex4you’s newly launched partner program also offers a  loyalty program and status program that enables partners to earn up to 75% of revenue.

From the looks of the current state of the world economy and its domination by inflation, interest rate increase and slower growth, it may take a while more before the high interest rates and inflation can be normalized. Whether the current situation turns out to be for the better or worse, you can decide by keeping yourself updated with qualified opinions, learning ways to identify opportunities, and take action.

Learn how you can take advantage of the increasing interest rates by trading on the financial markets with Forex4you.

Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure.

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