ELI5: Interest Rate Hikes, The Stock Market & Everything You Need to Know via /r/wallstreetbets #stocks #wallstreetbets #investing


ELI5: Interest Rate Hikes, The Stock Market & Everything You Need to Know

TLDR; Higher interest rates can lead to a drop in the stock market, due to it costing businesses more money to operate

  • Last week. the FED raised intertest rates last  for the first time in over 3 years, and warned of 11 more interest rate increases to come.
  • The FED hopes that by making it more expensive to borrow money, there will be less demand to borrow money for businesses, homes, cars and other goods that people & businesses borrow money for
  • The rationale is, because it costs more to borrow, fewer people and companies can afford things, so spending pulls back
  • The FED’s hope is that this will help slow down inflation, which, is at its highest levels since 1982
  • Higher interest rates can also lead to a drop in the stock market, primarily due to it costing businesses more money to operate
  • Policymakers estimate that 7 more interest rate increases will happen this year, bringing rates to around 2% by year end
  • They also expect 4 additional hikes in 2023, to bring the interest rate near 3%. 
  • But It Could Be Worse! Russia’s central bank doubled its key interest rate to 20% in early March

Also worth noting:

  • If you have a credit card, auto loan, student loan or mortgage, they are going to become more expensive if you have variable interest rates.
  •  Student loan payments are also scheduled to restart after May 1, 2022, so your payments will increase as rates increase
  • Also, interest rates will increase for those who plan to borrow student loans, mortgages or auto loans in the future
  • Interest rates would increase by about the same amount as the Fed hike, usually within one to two billing cycles.

Submitted March 24, 2022 at 07:16PM by TonyLiberty
via reddit https://ift.tt/qIspcHy