How the Fed's interest rate hike impacts your finances

What happened with interest rates in the US?

According to G1, the Federal Reserve (Fed), the central bank of the United States, decided to raise the interest rate by 0.25 percentage points, now in the range of 3.75% to 4% per year. This is the first hike in over three years, interrupting a sequence of stability in rates. This decision was unanimous and reflects concerns about inflation, particularly in a scenario of rising oil prices and geopolitical tensions.

Why does this matter?

The increase in US interest rates has a significant impact on the global economy, especially in emerging countries like Brazil. With US rates higher, US Treasury bonds become more attractive to investors. This can lead to a capital outflow from Brazil, causing the real to depreciate against the dollar. When the dollar strengthens, imports become more expensive, which can put pressure on inflation in Brazil and, consequently, force the Central Bank to keep the Selic rate high.

What changes for you?

If you earn a salary and pay bills, the rise in US interest rates can reflect in various areas of your daily life:

• Loans and financing: If you have a loan or financing, the trend is that interest rates will also rise in Brazil, increasing the amount of your installments. For example, if you have a financing of R$ 100,000, a 1% interest rate increase can raise your monthly installment by up to R$ 200.
• Credit card: Credit card interest rates may rise as well. If you have a debt of R$ 5,000 at a monthly rate of 10%, a 2% rate increase could cost you R$ 1,000 more in interest over a year.
• Investments: If you invest in fixed income, such as CDBs or Treasury Direct, new issuances may offer higher rates. This could be an opportunity to increase your investment returns.

What to do in this scenario?

With these changes in mind, here are some concrete actions you might consider:

• Review your debts: If interest rates are rising, consider renegotiating your debts or looking for alternatives with fixed and lower rates.
• Increase your emergency fund: In uncertain economic times, having a robust reserve can help cover unforeseen expenses without resorting to expensive credit.
• Invest wisely: Evaluate the possibility of diversifying your investments to include options that can benefit from higher interest rates.

Connection with your financial organization

When organizing your personal finances, the 50/30/20 method can be a valuable tool. Allocate 50% of your income to needs, 30% to wants, and 20% to savings and investments. With the potential for higher interest rates, it's even more crucial to maintain financial discipline and plan your expenses. This way, you prepare yourself to face market fluctuations and ensure your personal finances remain healthy.