Spoiler alert: interest rates are going up in 2022. Rising inflation is forcing the Federal Reserve to modify their game-plan. It appears the Federal Reserve will begin hiking interest next year to combat stubbornly highly inflation.
After their two-day policy meeting this week, the central bank announced plans to phase out their large-scale bond buying program quicker than initially planned. The Fed began bond buying during the early stages of the pandemic to protect against market disruptions in the economy and to keep borrowing costs low.
The Fed initially said they wanted to stop bond purchases before considering increasing rates. By ending bond purchases now, it would give the Fed increased agility to raise rates sooner to prevent prices from elevating to dangerous levels.
The November consumer price spike of 6.8% triggered the Fed to adopt a more assertive stance. The November price increase from a year ago was the largest increase in nearly 40 years.
The Fed has kept rates close to zero through the pandemic to hold up the economy. Any Fed rate increases would elevate borrowing costs to lenders who in turn pass those elevated costs on to borrowers-namely retail and business clients.
For small businesses contemplating borrowing, it may behoove you to move up your timeline to avoid a higher rate environment.