How the Fed's Interest Rate Decision Affects Your Finances

What Happened to US Interest Rates?

According to G1, the Federal Reserve (Fed), the central bank of the United States, decided to keep interest rates unchanged at a range of 3.50% to 3.75% per annum for the fifth consecutive meeting. This decision reflects an economic scenario marked by uncertainties, such as rising oil prices and geopolitical conflicts, which keep the Fed vigilant about inflation.

Maintaining interest rates at this level is a strategy to control inflation, which remains above the 2% target. Fed Chairman Kevin Warsh emphasized the importance of maintaining the institution's credibility and not yielding to external pressures.

Why Does This Matter to You?

The US interest rate policy has direct effects on Brazil, especially on the Selic, Brazil's basic interest rate. When the Fed maintains high interest rates, international investors often direct their resources to the US in search of higher yields. This movement can devalue the real against the dollar, impacting your purchasing power and increasing the prices of imported goods.

Additionally, if Brazil's Selic remains high to align with US rates, you may feel the impact in your day-to-day expenses, especially regarding debts like loans and financing. For example, if you have a R$ 20,000 loan at an interest rate of 12% per year, maintaining high Selic may make it harder for you to pay it off, increasing the total amount to be paid over time.

What Changes for Those Who Earn Salaries and Pay Bills?

With high interest rates, your disposable income may be affected. When a larger part of your budget goes toward interest payments, less is available for other expenses or savings. Let's consider an example: if you earn R$ 3,000 a month and have monthly expenses of R$ 1,200 in interest and credit payments, that represents 40% of your income. This scenario makes it essential to use your budget wisely.

• 50% for Needs: R$ 1,500 for housing, food, and basic bills.
• 30% for Wants: R$ 900 for leisure and shopping.
• 20% for Savings: R$ 600 for investments and emergency funds.

With high interest rates, it’s important to reassess your distribution, prioritizing debt repayment and building a financial reserve.

Concrete Actions You Can Take

Now that you understand how high interest rates impact your finances, here are some practical actions you can adopt:

• Review Your Budget: Evaluate your expenses and see where you can cut costs.
• Prioritize Debt Payments: Focus on those with the highest interest rates.
• Establish an Emergency Fund: Aim to save at least three months of expenses.
• Consider Safe Investments: In a high-interest scenario, fixed income might be a good option.

Connection with Financial Organization and ADXIS

The maintenance of interest rates in the US and its reflection in Brazil highlight the importance of staying informed about economic news and how it affects your personal finances. By using the 50/30/20 method, you can better organize yourself and prepare for uncertain times. ADXIS can assist you in this process, offering tools to monitor your budget, plan your goals, and ensure you're always one step ahead.