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Does the Federal Reserve Affect Me? 🏦

Does the Federal Reserve Affect Me? 🏦

TLDR; Yes. 🏡💼💸

autonomous
March 22, 2023

Good morning folks 🌞

Not only is there an ongoing banking crisis, but it’s also Fed Day, aka the day the US Federal Reserves decides what they are going to do next in order to stabilize the economy. The Fed has Open-Market-Operations meetings 8 times per year where they discuss their actions and outlook.

So far, markets are unsure if Fed is going to continue its plan to raise interest rates or whether they will pause in order to help ailing and failing banks who would struggle further with higher rates and tighter financial conditions.

Why is the Fed important to you?

The US Fed is the heart of the global financial system. The Feds overall outlook and the Fed Funds Rate act as the benchmark for the rest of the investing and business world. What the Fed says and does can affect:

👩‍💻 Your job: Are financial conditions “too tight” to the point your employer needs to cut jobs to maintain margins?

💵 Your wages: high inflation should mean higher wages, until financial conditions are so tight that firms cut wages or cut jobs in order to survive.

🏡 Your mortgage: If you have a variable rate mortgage you are at the mercy of the Fed’s rate decisions. Your mortgage rate will go up and down with the Fed Funds Rate.

If you’re looking to buy a house, your mortgage cost will be highly correlated with where the Fed has set interest rates.

🏖️ Your retirement: Corporate, Municipal and Sovereign debt bonds move with the Fed Funds Rate. Stock prices tend to go down when interest rates go up. If you’re just starting to save for retirement these are favorable conditions to get started. Cheap stocks, higher yielding bonds. If you’re about to retire you

🏦 Your loan price: Got loans? Looking for one? The cost of money goes up or down based on the Fed’s decisions re: interest rates.