By Elisa Fernández-Arias
The Federal Reserve enacted an interest rate hike of a quarter of a percentage point on Wednesday, which will likely impact the K&B industry.
Key Takeaways:
- This was the ninth hike since March 2022;
- K&B will likely be impacted by the hike as consumers retrench;
- The stress in the U.S. banking system seems to have eased.
The interest rate hike on Wednesday of a quarter percentage point will likely impact the kitchen and bath industry, as consumers pull back on using credit cards and taking out remodeling loans.
The impact on K&B will also be reflected in mortgage rates. “After a couple of weeks of volatility, mortgage rates are likely to stabilize as a result of this Federal Reserve hike. Home buyers should accept that if they wait for interest rates to fall substantially, they might wait longer than they expect,” said Holden Lewis, NerdWallet’s Home and Mortgage expert.
Increased mortgage rates, along with inflation and recession fears, were already expected to cause a decline in the total revenue of the K&B industry in 2023, according to NKBA’s recent Kitchen & Bath Market Outlook Report (KBMO). Given that mortgage rates are unlikely to substantially decline after the most recent rate hike, K&B professionals should expect to see declines in business.
The Fed raised the rate to 5 percent from 4.75 percent on Wednesday, signaling its continued determination to fight against inflation despite the recent banking crisis. The Federal Open Market Committee stated that future rate hikes are not certain and will largely depend on incoming data. This approach differs from previous statements, which focused on “ongoing increases” as the definitive strategy for reaching the Fed’s long-term goal of 2 percent inflation, according to various sources.
The Fed also expressed optimism regarding banking financial stability. Indeed, the stress in the U.S. banking system has seemed to lessen during the last several days, with bank stocks doing better. Large regional bank withdrawals have “stabilized,” according to Janet Yellen, Treasury Secretary.
Meanwhile consumer prices have continued to climb, with annual inflation last month at 6 percent. Inflation had shown signs of cooling off, but it was still higher than the pace needed to reach the Fed’s goal of 2 percent.
Sources
2023 Seen as Challenging for K/B Market, Kitchen & Bath Design News
Fed hikes interest rate 0.25 point to curb inflation despite banking turmoil, USA Today
Fed hikes rates by a quarter percentage point, indicates increases are near an end, CNBC
Fed Raises Rates by a Quarter-Point, Barron’s
Federal Reserve issues FOMC Statement, Board of Governors of the Federal Reserve System
The Fed lifts rates by a quarter point as banking turmoil complicates inflation fight, CNN Business
The Fed raises interest rates again despite the stress hitting the banking system, NPR