PFW professor breaks down impacts of interest rate hikes

PFW professor breaks down impacts of interest rate hikes
Published: Sep. 23, 2022 at 4:48 PM EDT
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FORT WAYNE, Ind. (WPTA) - The Federal Reserve hiked interest rates yet again on Wednesday in an effort to slow inflation, but how exactly does that work?

Zafar Nazarov, an Associate Economics Professor at Purdue Fort Wayne, says the most recent rate hike of .75% is the fifth increase this year. He says he expects to see the Fed raise rates again in the coming months, explaining that high inflation is a result of too much money chasing too few goods.

To fix this problem, he says government officials want to decrease the money circulating by decreasing demand. The Fed aims to do that by making businesses and consumers less likely to take out loans because of the high cost of paying them back.

The rate hikes have had only a marginal impact on reducing inflation so far, but Nazarov says it’s already having a big impact on the mortgage industry. He says last year’s hot housing market inflated the workforce of many mortgage lenders, which is now unsustainable.

A prime example of this issue is Ruoff Mortgage, which made plans to expand and move into a new headquarters last year. But earlier this month, the company announced that it has reduced its workforce by almost 5%, citing current economic conditions and a decrease in those financing and refinancing homes.

Watch the report above for a deeper dive into the effort to slow inflation.