Banker: Feds must use interest rate hikes to contain inflation

Davy Carter has a pretty good seat to gauge the local, state and national economies. From his perch as Northeast Arkansas regional president for Centennial Bank and as a director on the Memphis branch board of directors of the St. Louis Federal Reserve Bank, Carter collects a lot of qualitative and quantitative data.

Carter, former Speaker of the Arkansas House of Representatives, shared his thoughts on the state of the economy and the Feds latest move this week to aggressively raise interest rates by 0.75%.

“They’re in a very difficult position, but they’ve got to get inflation under control. If they don’t get ahead of it and get it under control, this could go on for years and years and years and years,” he said.

While more rate hikes are expected, Carter said it is unlikely to be an overnight fix.

“It’s going to take some time for this to filter through the system. So constantly every month we’re getting updates from these – it’s inflation and employment,” he said.

In Jonesboro and the surrounding region, Carter is seeing a robust economy in terms of business growth and consumer spending. Rising interest rates will make new commercial real estate deals more difficult, but the biggest hit could come in the housing market.

“The cost of borrowing is going to go up. So it costs more to buy a vehicle, your credit card balance, your credit card rates are going to increase. And probably the most significant thing that hits closest to home, no pun intended, is mortgage rates,” he said. “Mortgage rates have risen significantly over the past two or three weeks. You’ve gone from 30-year fixed rate mortgages from three, 3 1/4 to almost 6% now. So that takes a lot of buying power out from the homebuyer who’s out trying to buy a house in this inflated market, and at the same time when housing prices are at an all-time high. It’s going to be a difficult thing to navigate through.”

You can watch Carter’s full interview in the video below.