Local bankers react to Fed move to raise interest rates to highest level since 2008

As expected, the Federal Reserve Board raised interest rates by 75 basis points, or 0.75%, Wednesday, the Fed's third consecutive rate move this year aimed at wrestling stubborn inflation under control.

Not since 2008, the waning days of George W. Bush's second term, has the U.S. seen interest rates this high, and three local banking leaders, at the invitation of the Southeast Missourian, have weighed in with their opinions.

Jay Knudtson

Jay Knudtson, First Missouri State Bank

"Banks, as well as consumers, are now entering into uncertain times, and it is imperative that we lock arms and plow through these times together. I say this because it is not known what the impact of these rising rates will have when colliding with the ongoing labor shortfall. You see the early signs right here at home with the City of Cape having to close Cape Splash and also push back recycling pickups due to labor shortages. Speaking of shortages, the Southeast Missourian just announced there soon will no longer be home delivery of the newspaper due to labor challenges," said Knudtson, mayor of Cape Girardeau from 2002 to 2010.

"While the Fed's 75 basis point move was probably baked into the market, it will have a profound impact on traditional banks lending and deposit rates. Mortgage rates have certainly been the fastest to move with rates seeing levels they haven't seen since 2008. This latest hike will directly impact all other loans and deposits," he added.

Clint Karnes

Clint Karnes, Wood & Huston Bank

"The Fed continues to make strong efforts to curb spending with this latest move. This should further cool the local and national housing market. Hopefully, we will see some slowdown in core consumer prices but this looks like a marathon, not a sprint," said Karnes, community bank president.

Wade Bartels

Wade Bartels, Alliance Bank

"The speed and volume of this year's rate increases will certainly impact households and businesses," said Bartels, who is president and CEO. "Typically, a rising rate environment is done over a longer period of time and (with) smaller increases over that period. Something has to be done to combat inflation but it will come with some financial pain. Housing is obviously an area where consumers will feel a pinch. Those who have adjustable rate mortgages will see significantly higher payments. Renters will also be affected as landlords find payments are more expensive on their loans; rents will correspondingly be increased for tenants. As housing costs take a bigger bite, consumers will have less disposable income so businesses will be impacted. Business borrowing costs will also go up, decreasing available cash flow."

Bartels also said the Fed has no good solution to fight inflation that will not negatively affect the economy.

"My hope is these rate increases will tame inflation in the short term so we can avoid a significant recession," he said.