I have been following the Bank of Canada (BOC)'s rate hike for quite some time now. Today, the Federal Bank in the US also raised the policy rate by 50 basis points.
It is not surprising as the increase was predicted by almost all leading up to the meeting. The reason behind the increase is the economic tightening monetary policy that has been played out since the early 2022. There is nothing new in that.
With the increase, the variable mortgage rates and other load interests that are subject to federal policy rate will go up. The aim is to lower the inflation from six percent range to the target range of 2%.
The problem lies there.
The ongoing war in Ukraine and the supply chain disruption will continue to pressure the inflation rate. There are institutions and experts forecasting recession in the future.
I am on the watch-out now. These are dubious times with economic turmoil. The best strategy now is to check your consumption and don't be over-leveraged. I also know that it is a joke to suggest someone with high mortgage and limited income to reduce leverage position.
I cannot do that myself.
What's the solution?
Try to ride the rate increase wave. Make sacrifices like I am doing right now. I am focusing on riding this wave out with the knowledge that i will have to live paycheque every two weeks. It is not easy but that is how the rate increase is impacting me.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
With the language the Feds chose today, it seems there are not immediate hikes in the card. As I mentioned in my previous posts, they will wait and see what the inflation and other related numbers are for the next three months. The next rate hike could happen in March - my best guess and I have been wrong many times.
What's your prediction?
