Utah economist explains the reason behind interest rate increase

SALT LAKE CITY — The Federal Reserve announced Wednesday three-quarters of a percent interest rate increase. That’s the biggest rate increase since 1994.

On KSL NewsRadio’s Noon News, Robert Spendlove, an economist with Zions Bank, was asked why not a half percent like what’s been done in the past.

“The theory is and what the Fed is trying to do is saying, OK, the borrowing cost is going up,” he said. “So that will pull down the purchase price of the item and that should slow down or reduce that inflation.”

Spendlove says the Fed was expecting inflation to slow down. However, the opposite happened to cause the interest rate increase. 

“On Friday, we got a new reading of inflation,” he said.

“And the Fed was expecting that the inflation would start to slow down. But the opposite happened, and the inflation sped up. And so, it essentially caused the Fed to reevaluate what they were planning on doing.”

It is expected that the Fed will continue to slowly raise interest rates. Interest rates are expected to climb by another 2% by the end of the year.

Mark Jones contributed to this article.

Read more:

• Many Utah consumers feel hopeful about their finances, despite inflation
• US inflation hit a new 40-year high last month of 8.6%
• Wholesale inflation impacting businesses all across Utah
• Inflation usually makes the Fed hike interest rates. Here’s what that means