Impact of Rising Interest Rate

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Interest is the cost of, either borrowing or lending, doing business. Even non-business people are  not immune from the interest rate fluctuation. Let’s see: mortgage, rent, credit card, car, student loan, or price of groceries. Its presence is omnipresent in our everyday life.

So when the Federal Reserve began to raise the interest rate a year ago in its efforts to tame the inflation, the impacts both foreign and domestic are far and wide. And one such example and the big news in the market today is the collapse of the Silicon Valley Bank.

Certainly one bank’s failure does not define the entire financial sector. However, the Fed is expected to raise the interest rate again later this month. Will the banks’ profit continue to erode as a result?

Before you join the sucking sound of other depositors rushing out the door to withdraw money, there is  no need to panic. Most deposits in the US are insured by the FDIC (Federal Deposit Insurance Corporation) up to $250,000. And if you have more than quarter of a million in deposit?

Seek professional advise.

How high do you think the interest will go?

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2 Responses to Impact of Rising Interest Rate

  1. OmniRunner says:

    Until the tide changes they will keep jacking the rate.
    With all the coverage of SVB going bust, the talking heads have noted that banks are more diversified and stronger than in 2007. And this failure wasn’t cause by CDOs and bad mortgages. It was caused by high interest rates and basically a run on the bank.
    A lot of start ups had hundreds of thousands or millions on deposit. I expect to see several start-ups go belly up since their VC cash has vaporized.
    It could get interesting in the tech sector for the next year or so.
    I think some CFOs learned a valuable lesson about where to stash the cash.


  2. terryshen says:

    Yes Andy, the story continues . . .


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