What Happens When The Fed Stops Raising Interest Rates?

March 27, 2023

Will inflation ever get back under control? What does that mean for investing in the stock market? In this highlight, Brian and Bo give some insight on the current state of interest rates and what we should expect.

Want to know what to do with your next dollar, you need this free download: the Financial Order of Operations. It’s our nine tried-and-true steps that will help you secure your financial future.


You know, it seems like we’re in a phase of time where someone is always saying something about inflation. So, we’ve got a question surrounding that. It’s from Bill, and it says, ‘The Federal Reserve is apparently thinking about not raising interest rates anymore. I know some people think this is good for the stock market, but I am worried that inflation will never get under control if they stop raising rates. What do you guys think? How should the financial mutants be thinking about this yet again?’ Yeah, it’s really interesting.

If the whole inflation and Fed raising rates is new to you, some really fun reading is to go historically look back at what the Fed estimates of interest rates and direction were going to be. It’s amazing like even the folks that live and breathe this that say, ‘If you go look at, like, in 2015, what they thought rates were going to do and where they were thinking? Nobody. It’s all over the place. It’s so frenetic. There’s no rhyme or reason to it.’ So, guessing what the Federal Reserve is going to do and where interest rates are going to go and at what pace that’s going to happen is a really difficult thing to do.

Now, he said something interesting. Did the Fed say that they’re thinking about not raising rates anymore, or was what they came out and said that they’re thinking about slowing down the pace at which they’re increasing? I don’t know if I heard that from the Fed. I have heard that from a number of prognosticators from financials who said, ‘Hey, I’m calling the top. This is it. Interest rates aren’t going to go any higher than that.’

Brian, how would you answer someone who said, ‘Hey, I’m hearing all these things. How does this play into my personal financial situation? How do I go about making decisions around this? And what should I be thinking when it comes to inflation? If the Fed raises rates or drops rates or moves them fast or doesn’t move them fast, what are some things I should do as a person trying to sustain wealth in the long term to protect myself?’

Coming back from vacation, I was at the airport and ran into somebody at the airport who knew we were content creators, and they were asking me if I knew what I was doing to handle all this. I went right back to, ‘I’m always going to be buying.’ I look. This is scary. I mean, all the stuff that happened in banking, but I think if you actually got down to root causes, you’ll find out that there are some unique things going on. Obviously, Silicon Valley has a very unique client base. The tech sector is getting beat up, you know.

But here’s what I think is interesting: inflation is something that takes time to measure, meaning it’s a lagging indicator. And I do find it interesting if you compare the steepness of interest rate increases now that the Federal Reserve has been doing over the last year and a half to what was done back in the ’80s, you’ll see that it is night and day. I mean, for all of us thinking about how crazy it was, how much they raised interest rates in the ’80s, and then you go compare it to what we’ve done now, it is kind of crazy, the breakneck. How do you measure if what you’ve done has actually had an impact if you’re just always slamming on the accelerator? It’s seeing the ripple effects.

Now, the interest rate risks of what they have to pay have moved so fast that it’s caught them in some weird situations, especially if they don’t have liquidity, meaning that their depositors are not bringing in money every month. There’s a lot to be read about that, but this is what I would encourage. And I know the Federal Reserve is not watching what we say, but I always say with big heavy decisions, measure twice, cut once. I don’t think it’s a bad thing if the Federal Reserve does slow down the pace. I don’t know if they will, I don’t know what the mark is. Nobody knows what I’m always going to be buying, I’ll just tell you that. But my personal opinion is I think it’d be okay if we slowed down the pace just to see how the behavior and the actions we’ve taken have actually processed by the economy, to see if inflation is still going on, because I don’t right now. I see a mixed bag of results. If you go look at some of the things that you’re in construction and so forth, they’re back to where they were. If you go look at shipping container costs, it is like it fell off a cliff. I mean, so also that impact our day-to-day purchases are coming down. I just don’t want the Federal Reserve to, because always the scariest thing in the world is somebody who’s trying to look tougher than they actually are because they’ll throw the punch faster than they should. They’ll pull the trigger faster than they should because they’re so worried about coming off as weak that they actually have what is it called when you have the twitchy trigger or whatever. I mean, that’s the trigger, oh, you know, the hairline trigger. But it’s just people react inappropriately because they’re not giving it enough time. Because this is complicated, heavy, lots of facets, lots of moving parts.

I’d be okay if it slowed down. I don’t know if it’s gonna slow down because I think the Federal Reserve is feeling under pressure. And I can’t figure out if Jerome Pyle, if he feels like when he gets those calls because, you know, those calls are coming in right now, and you know the White House is calling, legislators are like, you son of a gun, slow it down. And he is, I don’t know if his personality is, “You don’t tell me what to do,” or if he’s like, “Alright, I’ll slow it down.” Yeah, I just don’t know. And that’s what’s so weird about having a Federal Reserve because you have added to something that’s supposed to be efficient, a marketplace, this inefficient thing, and it’s just weird. So, how do you protect yourself? Just keep buying.

The other thing I think that’s interesting, and this is the tale in a Bill’s question, will rising rates or falling rates be good for the stock market? Nobody knows. Nobody knows. It’s really, really interesting. We’ve seen times where rates have increased and the market has reacted favorably, and we’ve seen times when the market has decreased, and the market has reacted favorably. I would argue that’s one of those things that I don’t know that you can clearly say, “Okay, if rates go up another quarter point, here’s what the market’s going to do,” because I don’t think it’s that simple of a question to answer because the economy is so related. So, it’s back to Brian’s very first point. If you’re an investor and you’re accumulating, always be buying, and you’re likely going to set yourself up for a great big beautiful tomorrow.

If you want to know how powerful your dollar bills are, check out our Wealth Multiplier deliverable here.



Most Recent Episodes

The Best and Worst Types of Life Insurance!

No matter how much you know about finance, you’ve definitely heard about life insurance: maybe from commercials pitching it as something to buy your baby, or a family member or friend that got into the industry. Is life insurance worth getting or something you should...

How to Recover From 4 HORRIBLE Financial Mistakes!

In our nearly four decades of combined experience managing money, we’ve seen some horrible financial mistakes - here are the four worst we’ve seen first-hand and what you can do to avoid making a similar mistake. In this episode, you’ll learn: The worst financial...

New Data: Active Investments Are Better Than Index Funds?

A new research paper is out that claims active funds from two large providers, Vanguard and Fidelity, beat their own index funds. Are active funds beating index funds? What’s going on here? Let’s find out! For more information, check out our free resources...

Why Americans Are Actually Broke! (2023 Edition)

Americans might be bad with money, but you don’t have to be. In this episode, we discuss the underlying reason why Americans are so bad with money and how you can do it better. In this episode, you’ll learn: Common financial pitfalls you should avoid Practical steps...

Build Wealth With the 3 Bucket Strategy! (By Age) 2023 Edition

We believe there are three distinct taxable buckets you have the option of investing in for retirement. We’ll talk about how to balance those buckets by age and show a case study by age that shows what your buckets may look like! In this episode, you’ll learn: The...

Debt Ceiling Crisis: World’s Financial System at Risk?

Should you be worried about the debt ceiling crisis? Although political leaders have so far been unable to come to an agreement, we'll tell you what history says will happen and what it means for your finances. For more information, check out our free resources...

Financial Advisors React to INSANE Money Advice on TikTok!

Is financial advice on TikTok all bad or is there some good advice out there? Check out our brand new TikTok react show where Brian and Bo give their honest reactions to trending financial advice. Enjoy the Show? Sign up for the Financial Order of Operation (FOO)...

How to Save Thousands of Dollars in Taxes in 2024

Tax season is over for most of us, but that doesn’t mean it’s time to stop thinking about your taxes! Planning out your tax strategy in advance can save you time and money on your taxes. In this Q&A, we’ll discuss the line items on your return to pay attention to...

Average 401(k) Balance by Age (2023 Edition)

Are you doing better than the average American at saving in your 401(k)? We'll talk about basics of a 401(k), including new limits, employer matches, and vesting schedules, how many millionaires are created by 401(k)s, and of course the average 401(k) balance by age....