Inflation & Interest Rates
February 9, 2023
If you are like most people, you have probably recently asked yourself, “Why is everything becoming so expensive?”
Inflation is a topic you have probably heard a lot about lately, and you’ve probably felt its impact yourself. Record-high interest rates have also made headlines in recent years. Now let’s talk about how these two things impact each other.
Interest rates tend to move in the same direction as inflation but with lags because interest rates are the primary tool used by central banks to manage inflation.1 The Federal Reserve uses the Personal Consumption Expenditures (PCE) Price Index to measure inflation and responds to elevated inflation risks by raising its benchmark fund rate.1 The FED also raises interest rates in an effort to lower inflation.
Inflation is a major concern for those nearing retirement because it means the money you saved will be worth less. Some people may even have to work longer than expected to make up the difference.
While we cannot know for sure what the future of inflation will hold, the best thing you can do is prepare. We can help you account for inflation in your strategy and make necessary changes to make sure you stay on track for a successful retirement.
We look forward to helping you!
1. https://www.investopedia.com/ask/answers/12/inflation-interest-rate-relationship.asp