Interest rate hike good, bad for residents
Federal Reserve raises rates from .25-.5 percent
About a week ago, the Federal Reserve raised interest rates by a quarter of a point to a range of .25 to .5 percent, signaling to many financial analysts that the U.S. economy has begun to come out of the 2008 recession.
“I feel confident about the fundamentals driving the U.S. economy, the health of U.S. households, and domestic spending,” Fed chief Janet Yellen said during a press conference. “There are pressures on some sectors of the economy, particularly manufacturing, and the energy sector…but the underlying health of the U.S. economy I consider to be quite sound.”
Locally Lawrence County economic leaders see the hike as the proverbial double-edged sword that will hurt and help depending on what side of the interest rate people are.
“I think there will be some national tremors,” Dr. Bill Dingus, executive director of the Lawrence Economic Development Corporation, said. “It will concern some of the people who have investment building projects sitting on the fence. They realize if the projects are ready to go they should be done quickly before the interest rates goes up more.”
For many of its projects, the LEDC borrows from banks, but such a small interest hike won’t impact those projects, Dingus said.
The almost decade-long low rates have affected the financial industry and those depending on their investments for income such as retirees.
“With banks and lending companies when you have the interest rate so low, it is difficult to make money,” Dingus said. “The city of Ironton has one of the greatest percentage of retired people who have put back their life savings wanting a reasonable interest rate to supplement Social Security.”
When Lawrence County Treasurer Stephen Burcham took office in 2004 interest rates were between 4 to 5 percent. Since then he has watched them fall dramatically.
“A quarter of a point is what I expected,” Burcham said. “It shouldn’t significantly impact the interest that the county earns. Everything is already invested for next year except for two CDs. Most interest will come through the following year.”
Those affected adversely will be those on adjustable rate mortgages and credit cards, the treasurer said.
Right now, the county has 21 CDs and 24 bonds from the Neighborhood Investment Program where the treasurer buys bonds from governmental entities wanting to fund projects at rates less than banks, but higher than what the county gets on its CDs.
With the increase, the treasurer said he would adjust the rates for the program.
“For the country as a whole, I think this is what we are looking for, pulling out of the recession,” he said. “But there are still pockets who struggle to pull out. Lawrence County and the Tri-State are in one of those pockets.”
Ironton businessman Rob Slagel sees those who are highly leveraged at a bank or with a floating interest rate can be hurt by the increase. But he agrees with the Fed chief that the economy is coming into the light again.
“The economy is getting better due in part to energy going down,” Slagel said. “Low energy prices help the economy. Interest rates have been really low. It was needed to keep them down. But if it means the economy is getting better, I am willing to pay a little bit more.”