INSIDE SOURCES

Inflation usually makes the Fed hike interest rates. Here’s what that means

Dec 23, 2021, 6:17 AM
wholesale inflation utah interest rates...
FILE: KSL TV

SALT LAKE CITY — As inflation rises, the Federal Reserve says it will start tapering, then raising interest rates next year.

State Rep. Robert Spendlove, R-Salt Lake City, who is also an economist with Zions Bank, breaks down how the Fed’s actions might impact your wallet.

Because of supply-and-demand imbalances brought on by the pandemic and the reopening of the economy, inflation is rising. To combat this, the Fed is beginning to taper — or buy fewer bonds.

“Over the last year, the Fed has been buying $120 billion of bonds per month, mostly Treasury securities and mortgage-backed securities,” Spendlove told KSL Newsradio’s Inside Sources.

Spendlove says the Fed has two ways to influence the economy: slow it down or speed it up. Raising interest rates slows the inflated or overheated economy. Buying bonds is the economic gas pedal.

The Fed will take its foot off the gas, buying much fewer bonds. About half what it was buying before, to be precise. You can count on seeing $60 billion in bonds purchased each month starting in January.

Interest rates to rise — thanks to inflation

Projections released last week indicate that the Fed might have as many as three rate hikes coming in 2022, CNBC reports.

“As those interest rates start to go up, it’s gonna have an impact, especially on the tech sector because it will make it more expensive for those startups to expand,” Spendlove said.

“What are some of the practical impacts of whether it’s the tapering — foot off the gas — or whether it’s the interest rate going up with the tap on the brake?” host of Inside Sources, Boyd Matheson, asked.

“By increasing interest rates,  it’d be more expensive to finance things that we want to buy,” Spendlove said. “It’s going to make financing a home more expensive, financing a car more expensive. The goal is, all else equal, it should force those prices to drop because the cost of financing is higher.”

Don’t fight the Fed

The Fed sends messages to the public with interest rates.

If the interest rates are low, the message is you should not save money but spend money.

“When [the Fed] start raising interest rates, they’re shifting that message, and they’re saying, ‘OK, rather than spending money, you should save more money,” he said.

The Fed wants to slow economic growth just enough without creating a recession.

Inside Sources with Boyd Matheson can be heard weekdays from 1 p.m. to 3 p.m. on KSL NewsRadio. Users can find the show on the KSL NewsRadio website and app. 

We want to hear from you.

Have a story idea or tip? Send it to the KSL NewsRadio team here.

Today’s Top Stories

Inside Sources

Rabbi Avremi Zippel talks to the crowd during halftime of a Jazz-Portland Trail Blazers game at Viv...
Mark Jones

International Holocaust Remembrance Day: Area rabbi shares his thoughts

Rabbi Avremi Zippel joined Inside Sources Friday to discuss International Holocaust Remembrance Day.
4 days ago
savings system right on the money...
Mark Jones

Economists are worried of a recession in 2023, financial expert weighs in

Many economists are fearing a recession in 2023 despite the U.S. economy ending last year better than expected.
5 days ago
BYU study finds we need to stop watering as much as we are....
Mark Jones

Speaker Wilson says Utah legislature is working hard on water issue

SALT LAKE CITY — Prior to the start of the 2023 Utah Legislative Session, it seemed like water would be a popular topic throughout the 45-day session. And a week into the session, that appears to be the case.  House speaker Brad Wilson (R-Kaysville) joined Inside Sources hosted by Maura Carabello and Taylor Morgan to […]
6 days ago
A “now hiring” sign is pictured at Salt Lake Running Company in Salt Lake City on Friday, Nov. ...
Curt Gresseth

Salt Lake Chamber president talks about fixing shortages in housing, labor and water in Utah

Derek Miller, president and CEO of the Salt Lake Chamber, joins the show to discuss three big problems facing Utah today: the housing, labor and water shortages.
7 days ago
egg cartons are pictured in a store fridge, there is currently an egg shortage...
Mark Jones

Smuggling eggs: What people will do these days to get eggs

ABC News correspondent Alex Stone tells KSL NewsRadio that he has heard reports of the smuggling of eggs into the country by citizens who live near the Mexico border.
11 days ago
The Utah Education Association is opposed to H. B. 215. The UEA says school choice and a teacher pa...
Mark Jones

UEA opposes H.B. 215, says “school choice” and teacher salaries are separate

The Utah Education Association wants a teacher pay increase with no strings attached.
12 days ago

Sponsored Articles

Banner with Cervical Cancer Awareness Realistic Ribbon...
Intermountain Health

Five Common Causes of Cervical Cancer – and What You Can Do to Lower Your Risk

January is National Cervical Cancer Awareness month and cancer experts at Intermountain Health are working to educate women about cervical cancer, the tests that can warn women about potential cancer, and the importance of vaccination.
Kid holding a cisco fish at winterfest...
Bear Lake Convention and Visitors Bureau

Get Ready for Fun at the 2023 Bear Lake Monster Winterfest

The Bear Lake Monster Winterfest is an annual weekend event jam-packed full of fun activities the whole family can enjoy. This year the event will be held from January 27-29 at the Utah Bear Lake State Park Marina and Sunrise Resort and Event Center in Garden City, Utah. 
happy friends with sparklers at christmas dinner...
Macey's

15 Easy Christmas Dinner Ideas

We’ve scoured the web for you and narrowed down a few of our favorite Christmas dinner ideas to make your planning easy. Choose from the dishes we’ve highlighted to plan your meal or start brainstorming your own meal plan a couple of weeks before to make sure you have time to shop and prepare.
Spicy Homemade Loaded Taters Tots...
Macey's

5 Game Day Snacks for the Whole Family (with recipes!)

Try these game day snacks to make watching football at home with your family feel like a special occasion. 
Happy joyful smiling casual satisfied woman learning and communicates in sign language online using...
Sorenson

The Best Tools for Deaf and Hard-of-Hearing Workplace Success

Here are some of the best resources to make your workplace work better for Deaf and hard-of-hearing employees.
Team supporters celebrating at a tailgate party...
Macey's

8 Delicious Tailgate Foods That Require Zero Prep Work

In a hurry? These 8 tailgate foods take zero prep work, so you can fuel up and get back to what matters most: getting hyped for your favorite
Inflation usually makes the Fed hike interest rates. Here’s what that means