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Home » CUNA research: Consumer spending will slow due to interest rate hike
Policy & Issues

CUNA research: Consumer spending will slow due to interest rate hike

March 16, 2022
Dawit Kebede

CUNA Senior Economist Dawit Kebede issued the following statement following the Federal Reserve meeting Wednesday:

“As expected, the Federal Reserve increased the federal funds rate by a quarter basis point today. It also revised its projection for year-end Personal Consumption Expenditure (PCE) inflation from 2.6% in December to 4.3%. Strong demand, enduring supply bottlenecks, and the surge in energy prices due to the war in Ukraine are contributing to inflationary pressure.

“As a result, The Federal Reserve signaled multiple hikes to federal funds rate throughout the year projecting it to reach 1.9% by the end of 2022 - revising its December projection by a full percentage point. This will raise consumers' cost of borrowing and slow down spending. Consumer spending contributes to two-thirds of the gross domestic product (GDP) - the value of all goods and services in the economy. The GDP growth projections will also decrease with the rising federal funds rate.” 

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