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Local expert: Increased interest rate may not slow inflation

The Federal Reserve Board of Governors seal is seen during the Inaugural Conference on the International Roles of the U.S. Dollar at Federal Reserve Board Building, in Washington, Friday, June 17, 2022. (AP Photo/Jose Luis Magana)

The Wednesday vote by the Federal Reserve System’s Board of Governors to raise the primary credit rate to 1.75% was made to temper inflation, but a local financial management adviser said the move may not pay off as well as intended.

According to Howie Pentony, founder and owner of Pentony Capital Management in Portersville, increasing interest rates works best to reduce short-term inflation.

However, the inflation striking the U.S. economy appears to be a long-term problem, he said.

“Generally, what happens is, the fed raises interest in short term rates ... If you make things more expensive, people won't buy them,” Pentony said. “Unfortunately, there hasn't been anything temporary about this inflation.”

According to Pentony, higher interest rates are beneficial for banks, which can get a better profit back on loans, but can reduce the number of consumers who seek out loans.

Pentony also said a 1.75% interest rate is not very high, but it could be raised more by the reserve as a method of fighting inflation.

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