Will the Federal Reserve Keep Raising Interest Rates in 2023?

It really depends on what inflation levels look like next year.

Inflation has been battering consumers for well over a year now. Since mid-2021, many people have had no choice but to raid their savings or rack up enormous tabs on their credit cards just to do simple things like put food on the table and keep the lights on.

The Federal Reserve, meanwhile, is doing its part to combat inflation by raising interest rates. But while the Fed's intentions are good, its actions are also putting a burden on consumers by making borrowing money more expensive.

The question is: Will The Federal Reserve keep raising interest rates next year? Or will that practice finally come to an end?

It all boils down to inflation

How does raising interest rates help fight inflation? It's simple: Inflation is a result of a mismatch between supply and demand. When there aren't enough goods to go around, prices tend to go up.

By raising interest rates, the Federal Reserve is hoping to dissuade consumers from spending money. That way, it can narrow that gap between supply and demand and hopefully lead to lower levels of inflation.

Meanwhile, the Federal Reserve has now raised interest rates by 0.75% during its last three meetings. And that practice could continue until inflation levels begin to moderate.

If that happens in the near term, the Fed might stop raising rates aggressively in 2023. But if inflation doesn't calm down, then consumers may find that borrowing rates are even higher next year.

What to do if you need to borrow money

Higher interest rates are a good thing for savers with money in the bank. Over the past several months, savings accounts and CDs have been paying interest more generously than they have in years.

On the flipside, the cost of borrowing has gone up across the board. Now, consumers are paying more for everything from mortgages to auto loans to personal loans.

If you need to borrow money, do some research to see what your most affordable options are. If you own a home, for example, you may find that a home equity loan is a better bet than a personal loan, at least from an interest rate perspective.

At the same time, do your best to boost your credit score, or keep an already solid score in good shape. The higher your credit score, the more likely you are to be rewarded with a lower interest rate on whatever sort of loan product you're looking at.

Finally, aim to keep your borrowing to a minimum. If you're taking out a home equity loan because you're desperate for more living space and need to finish your basement to create some, only borrow what you need for that project. Save additional projects like remodeling your kitchen for a time when borrowing costs are lower.

Only time will tell whether the Fed will keep raising interest rates in 2023. But even if rates don't continue to rise, it will still pay to do what you can to borrow money both strategically and less often next year.