DENVER — Tis' the season for saving. Well, at least economic and financial experts think so.
The Federal Reserve announced another federal funds interest rate increase Wednesday — the fourth consecutive three-quarter point hike this year. The effective federal interest rate is now at 4% for the first time since late 2007. Interest rates peaked at 5.25% in late 2006 and early 2007, roughly a year before the U.S. entered a recession.
This comes as inflation remains above 8%, the worst in four decades.
"Because of this higher prices on necessities, it is very important that we keep raising the interest rate. And we will expect the increase in interest rate would mean lower borrowing and lower expenditure, and that's why the prices are hopefully going to come down," Metropolitan State University Denver economics professor Kishore Kulkarni explained.
Mac Clause, a finance professor at Denver University, said major factors that are contributing to our current inflation are creating a much more complicated scenario than previous inflationary periods.
"We've had periods where we've had high inflation, but we haven't necessarily had periods where we've had high inflation along with serious supply chain issues and the [pandemic] and a serious war going on that's affecting Russia, Ukraine and Europe, especially. And we just haven't had all of those challenges occurring at the same time," Clause said.
Denver7 spoke to several holiday shoppers in Denver Wednesday, who plan on saving more than spending due to the economic situation.
"We might just have a light Christmas this year," Rebeka Darbonne said.
Darbonne isn't alone. A survey by Deloitte Insights shows shoppers in Denver will purchase seven less gifts this year compared to last year.
The data also shows that 41 percent of the nearly 500 people surveyed feel like they are in a worst financial situation this year compared to 2021.
While there is no calendar date indicating when interest rates will drop, experts say a decreasing inflationary rate will be the ultimate measure.
