BREAKING: 2022 New York State Solar Incentives Now Best In USA

High Interest Rates May Lead to Recession

Interest rates are continuously on the rise with no stopping point in sight. In fact, last week, the Federal Reserve increased interest rates by the greatest amount since 1944. The reported increase in the three-quarter percentage benchmark terminated the past four decades of falling and near-zero interest rates (1).

According to the Congressional Budget Office, annual interest on national debt will hit $399 billion by the end of this year. The federal funds rate is not the same rate consumers pay; however, the decisions made influence the borrowing and saving rates that consumers face every day. The federal funds rate is determined by the central bank and is defined as the interest rate at which banks borrow and lend to one another overnight (2).

This dramatic change in interest is pushing mortgage rates to their most expensive state within the last 14 years, and is causing bonds, technology stock, and cryptocurrency to plummet. Due to the extreme rise in mortgage rates, data from the Federal Reserve Bank of New York shows that homeowners are now missing out on a large source of cash that was once received from mortgage financing (1).

In general, high inflation makes it more difficult for people to increase their wealth. We are experiencing the fastest and highest inflation rate in 40 years. Inflation is not predicted to reach the central bank’s 2% target for another two years. Furthermore, it will be an extremely gradual decrease from the current level.

This poses the risk of possible destabilization of the dollar. So, the way to offset this is for The Federal Reserve to raise interest rates. However, even with raising interest rates, there is speculation around whether or not the goal will be reached due to uncontrollable factors (4).

Thus, a mild recession seems to be in the near future for the US economy. The driving factors include high interest rates, inflation, supply-chain issues, and the Russia-Ukraine war(6). The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months (8).”

A couple of months ago, there was no sign that 2024 would start off with a decline in the economy. However, we are now looking at a 75% chance it will. Some analysts believe that it may take a recession to cancel out inflation. Unfortunately, we will not know the answer to this until we are further down the road (7).

So… what should we do in the meantime? For starters, we should make safe and financially worth it investments. Switching to solar energy will have a positive effect on your bank account and the environment. Once you break even on your solar investment, you could save up to THREE times as much money as your initial investment. Furthermore, solar energy adds about $15,000 to the value of a home. Lastly, when choosing solar, you could save between $61,533 to $75,207 over a 25-year span. Going solar makes saving easy!