SIOUX FALLS, SD (KELO) – The Fed raised interest rates for the fifth time in six months to fight inflation.
Rates rose another 0.75 percentage points this week and are now up a full three percentage points since March.
“It’s unheard of for so many rate hikes in a short period of time,” said Matt Pekoske, assistant vice president of business services at Levo Credit Union.
Federal interest rates are now at their highest levels since 2008, and many speculate that the rate hikes are not over yet.
“I expect we’ll see more by the end of the year,” said Steve Stoverland, vice president of lending at Levo Credit Union. “I don’t know where it will stop.”
This can be a daunting unknown for business owners and consumers dealing with credit card debt or other variable-rate loans.
“A few years ago before covid or because of covid it could have been a great loan where they took gold plus 0.05% or something of that nature and now with gold prices increasing as much as they have in the past year, they interest rates have risen that high,” Pekoske said.
In addition to facing these higher payments, they also face higher costs due to inflation.
“For businesses, if they’re still trying to thrive in this environment, the first thing I recommend is to talk to your accountant or business loan officer and do a portfolio review,” Pekoske said.
Despite the rapid changes in interest rates, financial experts say there are ways to successfully manage growth.
“We’re not having above-normal real interest rates right now, and we’ve been above that a lot of the time,” Stofferahn said. “We’re used to an environment of ultra-low interest rates and historically there are still prime rates, so consumers or businesses shouldn’t just stop spending or stop borrowing.”
Levo Credit Union said everyone should seek expert advice and review their current portfolio to make changes, such as locking in rates or other restructurings, to help navigate changing rates.
“Just visit your loan officer and we’ll always have a way to structure the loan to try and save you money one way or another,” Pekoske said.
While Sioux Falls continues to record record business growth this year, financial experts say higher interest rates could slow some of that growth. Increased business costs may also continue to affect consumers.