Fed Interest Rate: Effect on the Economy

Fed Interest Rate: Effect on the Economy

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The Federal Reserve decided to pause rising interest rates in June 2023. That was the first break after 15 months of continuous rises. This development brought some semblance of comfort to consumers dealing with more expensive mortgages, credit cards, and other loans as a result of ten consecutive rate hikes. 


Since the Federal Reserve started increasing interest rates in March 2022 to combat inflation at a whopping 9.1% in June 2022, there has been a significant shift in the cost of borrowing money. The interest rate on a normal 30-year mortgage was approximately 3.2% at the beginning of 2022; it is now 6.8%, which means that the monthly mortgage payment on a typical property that costs $300,000 is now 50% more expensive. The annual percentage rate charged by credit card companies has reached an all-time high and now exceeds 20%, while the rates charged for other types of loans have also increased.


The central bank has started increasing interest rates to combat the most severe inflation in the past four decades. The good news is that data released by the federal government revealed that efforts are working, and inflation was down to 3.1%.


That pause didn’t last long, as we saw an increased fed interest rate of another 0.25%. What does all this mean for the average user?

Credit Card Loans

As the Fed raises interest rates, banks’ borrowing cost increases. Consequently, credit card issuers pass these higher costs to consumers through elevated interest rates on credit card loans. This means that the interest rate charged on outstanding credit card balances will increase, making it more expensive for consumers to carry credit card debt. Individuals should consider paying down credit card balances or exploring balance transfer options to lower-rate cards to avoid excessive interest charges.

Student Loans

Interest rates on federal student loans are directly influenced by the federal interest rates set by the Fed. Federal student loan interest rates also tend to rise when the Fed increases rates. Private student loans, which are tied to market interest rates, may also see an increase. As a result, borrowing for education becomes more expensive, potentially impacting students and their families ability to afford higher education. To mitigate the impact of rising interest rates, students should consider exploring grants, scholarships, and other forms of financial aid.

Mortgage Rates

The impact of increased Fed interest rates on mortgage rates can be substantial. Mortgage rates are closely tied to long-term government bond yields. Raising short-term interest rates can influence longer-term bond yields as the Fed raises short-term interest rates. Higher yields on long-term bonds lead to higher mortgage rates, making it more expensive for prospective homebuyers to finance their purchases. Higher mortgage rates can also dampen demand for new homes, potentially impacting the housing market. Homebuyers and homeowners should consider refinancing their mortgages when rates are low to lock in more favorable terms.

Stocks and Bonds

When the Fed increases interest rates, it can lead to a shift in investor behavior. Higher interest rates make bonds and other fixed-income investments more attractive than riskier assets like stocks. Stock prices may face downward pressure as investors seek higher returns in safer assets. 


Companies that rely heavily on borrowing may also see increased borrowing costs, affecting their profitability and stock performance. To protect investments during periods of interest rate hikes, diversifying a portfolio across different asset classes can provide a measure of risk management.

401(k) and Retirement Accounts

Higher interest rates can have mixed effects on retirement accounts like 401(k)s. Rising interest rates can lead to increased bond yields, which benefit the fixed-income portion of a retirement portfolio. However, the potential decline in stock prices due to interest rate hikes can negatively impact the portfolio’s equity portion. 


Overall, changes in interest rates can lead to fluctuations in the value of retirement accounts, and the impact depends on the specific allocation of assets within the account. Maintaining a long-term perspective and consulting with a financial advisor can help individuals weather fluctuations in their retirement accounts.

Everyday Purchases

When the Fed raises interest rates, borrowing costs for banks and businesses increase, which can be passed on to consumers. As a result, interest rates on consumer loans, such as auto and personal loans, may also rise. This can make everyday purchases more expensive for consumers who rely on credit to finance their purchases. Higher interest rates may reduce consumer spending, impacting retail sales and economic growth.

Businesses and Industries

Businesses relying heavily on borrowing to finance their operations, expansions, or investments may face higher interest expenses when the Fed increases rates. As borrowing costs rise, businesses may reduce capital expenditures, leading to a slowdown in economic activity in certain sectors. Industries that are more sensitive to interest rate changes, such as construction and real estate, may experience a decline in demand for their products and services.

Corporate Profits

Increased borrowing costs can negatively impact corporate profits. As businesses face higher interest expenses on their debt, their profitability may decrease. This can lead to lower earnings for publicly traded companies and potentially result in a decline in stock prices. Companies may also implement cost-cutting measures, such as reducing staff or delaying expansion plans, to offset higher interest expenses, further impacting the economy and job market.


Higher interest rates can influence business decisions on hiring new employees. As borrowing becomes more expensive, businesses may become more cautious about additional labor costs. This may result in a slowdown in hiring or a reduction in workforce expansion plans, leading to potential job losses or a slower pace of job creation.

Inflation Control

The primary objective of the Fed in raising interest rates is to control inflation. The central bank aims to reduce consumer spending and borrowing by increasing rates, which can help curb inflationary pressures. Higher interest rates may lead to reduced aggregate demand, which, in turn, can help stabilize prices and prevent the economy from overheating.


The Federal Reserve’s decision to raise interest rates is a complex balancing act aimed at controlling inflation and ensuring the economy’s stability. As the Fed adjusts rates, it significantly impacts various aspects of personal finance, including borrowing costs, mortgage rates, investments, and retirement savings. As individuals, being aware of these effects can help us make informed decisions to navigate changing financial conditions.


It is prudent to consider strategies that can mitigate the impact on personal finances during rising interest rates. This includes managing credit card debt, exploring financial aid options for education, refinancing mortgages, diversifying investments, and maintaining a long-term perspective with retirement accounts.


Lastly, staying informed about the Fed’s policy decisions and seeking guidance from financial experts can empower individuals to adapt their financial plans to changing economic conditions effectively. Individuals can better protect and grow their wealth in the long run by proactively managing personal finances in the face of interest rate fluctuations.


So you have decided to buy silver online.

Great choice. Let’s talk about silver.

Silver is exceptionally popular today. Part of the reason for this is the belief that it’s potential for upside value increase is even greater than the same belief in gold. In fact, there is a very good book on this subject entitled: “ Why Silver Will Outperform Gold by 400% in the coming years”. It’s a very scholarly book and quite convincing. Give it a read if you have the time.

Silver Bullion Prices

Mind you, one need not look as far as that book to find evidence of the common belief that silver has great potential for growth in the near future. All one has to do is go to the web or even Youtube and there are advocates of this thought at every turn.

At Durham Precious Metals we believe that silver is an easy choice because it gives a sense of substance due to its lower cost per ounce than gold.

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Probably 90% of our business is silver sales so this sentiment is fairly unanimous throughout the public. 10oz bars seem to be the most popular. Generic rounds and Silver Maples seem to be the next most popular and 1oz bars a close 4th place. It is our opinion that 10 oz bars and 1oz rounds are your best value as their premium over spot is very reasonable. However, there is no wrong choice when it comes to our silver product line because we try to concentrate on product lines with low premiums anyway.

Silver has always been a form of money. There are those that will argue that silver has been demonetized but we beg to differ. All one has to do is refer to the (CCRA) definition for 999 bullion. It is deemed by Rev Can to be a “ financial instrument”. Enough said on that subject!

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From a utility standpoint, silver has somewhere in the neighbourhood of 60,000 industrial uses including painting the backs of mirrors to create the reflective surface to collecting radiation in solar panels. If nothing else, the lack of an above ground supply of silver ( which is relatively new historically) will keep the demand for this metal strong since for most applications there is no viable substitute.

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Can you imagine the mayhem that would ensue if all the major electronic manufacturers came grinding to a halt due to a silver shortage? It would be catastrophic to the economy. We believe that this fact alone will be a major driver of support for the silver price when the powers that be run out of tricks in their attempt to suppress the price of silver. And yes, we agree that this practice goes on in plain sight and that the regulators turn a blind eye. Let’s hope justice prevails and that the historic silver/gold ratio returns to its traditional level.

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In the meantime…keep stacking!

So you have decided to buy gold online.

Great choice! Let’s talk about gold then, shall we?

Gold is, and always has been, a favorite of collectors of precious metals. Its 6000-year history of sustaining wealth is unprecedented. The yellow metal has launched wars, bought fortunes and has been a form of money throughout that history. It is one of the densest metals and also one of the densest elements on the periodic table. It weighs in at a density of 19.32 grams per cubic centimeter. Water, by contrast, has a density of 1 gram per cubic centimeter.

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Platinum is the densest of the common 4 precious metals at 21.45 grams per cubic centimeter.

People will often ask when gold is the right choice to buy as opposed to other metals such as silver. This is a very common question. There is no easy answer that anyone can give to someone so we always boil it down to practical applications.

Gold Bullion

Consider how much of an investment you are planning to make over-all throughout the course of your precious metals buying.  If you are planning on purchasing, for example, $10,000 worth of metals and then cap your spending then it really doesn’t matter which metals you buy. The volume of the purchase will be relatively small in terms of weight and size. Our main concern and Durham Precious Metals comes down to simple things like , cost of storage, cost of shipping and bulk. We are always trying to help our customers have the best experience as metals collectors.

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For example, if you were to tell us that you are considering selling a piece of real estate and use the proceeds to buy metals then gold would be our suggestion. The reason comes down to volume and weight at this point. Several hundred thousand dollars of silver would be an incredible amount of bulk at this spend level. Hundreds of pounds of silver would be hard to store practically and would be more expensive to store as well. If you are the DIY type it would also be harder to hide than a comparable dollar amount of gold.

Keep in mind that at the time of this writing gold is about 75 times more expensive in dollar terms as the same weight of silver. That equates to 75 times less bulk per dollar spend. This will make it much easier to hide or store if you are looking at large purchase amounts.

Price of Gold?

If you are only considering a small total purchase amount either of the metals is perfectly fine. The one consideration we always emphasize for small purchase amounts really comes down to personal perception. Here is what we mean. Silver is 75 times more bulky per dollar spend. Obviously, it is going to feel a lot more substantial if you buy $5000 worth of silver and have several hundred ounces to admire than only about 3 ounces. It’s a perception thing at this point but perception matters to people since perception can make us feel a particular way about what we spend our money on.

In closing, gold and silver are both great choices and neither is wrong in terms of their value of utility. They have both had a long history as a store of wealth and that isn’t likely to change any time soon.

Buy both with confidence. Buy Gold Online

We often carry pieces that we don’t list on site so feel free to call us for an up-to-date list.

About DPM

When you consider silver value and gold value, the wise choice is to stock up today. At Durham Precious Metals we make it easy and convenient to buy silver and buy gold online.

For those who are serious about investing in gold and silver bullion, DPM is your one-stop store to buy gold and buy silver, whether it be through our website or our retail store.

Many people want to know where to buy gold and do not realize they can avoid the traffic hassle of driving into the city and visit us at DPM located in Oshawa, Ontario. See our Retail Store page for directions. Our customers are delighted with our competitive silver price. We carry mint direct silver bars, silver coins, gold bars and gold coins.

Make Durham Precious Metals your choice for gold and silver bullion.

Consider a Gold IRA as well