The Federal Reserve raised the stakes in the fight against rising inflation last Wednesday, raising interest rates by 0.75% in a bid to choke cold water on historic inflation. Window film industry executives say the increase is necessary, but will likely test companies’ resolve.
The rate hike is the largest since 1994. This news follows a 0.5% increase in benchmark interest rates in May. Experts expected the same increase for June, but a continued rise in costs forced the Federal Reserve to reassess.
“We at the Fed understand the difficulties caused by high inflation,” Federal Reserve Chairman Jerome Powell said during a press briefing last Wednesday. “We are firmly committed to bringing inflation down and we are moving quickly to do so.”
The Federal Reserve‘s tactic is an attempt to fight inflation while keeping the labor market afloat. Federal policymakers expect the Federal Reserve to raise interest rates several times this year. While the increases are necessary to slow spending, the move comes at a cost.
Americans will begin to experience higher borrowing costs, which should help reduce inflation by pulling the reins on the economy and dampening demand. Rising rates will increase everything from credit card fees to mortgage rates and business loans.
This means that it becomes more expensive to borrow money. This takes the form of higher interest costs for credit, credit cards, car loans, home equity, mortgages and more. For example, a 30-year fixed-rate mortgage averaged more than 5% in early June, compared to less than 3% a year ago, according to Freddie Mac.
The factors involved
The Federal Reserve admits that interest rate hikes will take time to sink into inflation, but even then inflation will be at the mercy of a plethora of external factors, including COVID, the supply chain issues and the war in Ukraine.
“Russia’s invasion of Ukraine is causing enormous human and economic hardship,” the Federal Reserve said in a statement. “The invasion and related events are creating additional upward pressure on inflation and weighing on global economic activity. Additionally, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions.
Continued material cost volatility, supply chain issues, inflation and industry conditions also impacted the window film segment.
“This [increase] will slow capital improvements and expansions for most businesses,” says Ty Sullivan, owner of SPF Window Tinting in Hattiesburg, Mississippi. sold and development. still on the books and locked in by previous interest rates.
Sullivan remains optimistic amid the increase.
“SPF’s first and second quarters were both strong,” he adds. “Going into the third quarter, we don’t expect any immediate declines. Consumer demand is still strong while goods and services are lagging due to labor and material shortages.
A necessary evil
“The increase was expected and necessary to help mitigate the current rate of inflation,” Sullivan said. “As a provider of goods and services, it’s not ideal, but it’s on the horizon. Our business channels have had high demand since the pandemic, and we’ve been working hard to lay the groundwork the success of our products while building up reserves.
Expected or not, economic volatility abounds. Nicolas Pearl, owner of The Wrap Firm in Elma NY, keeps the pace of business going through creative initiatives.
“We had to move from custom solid color packaging to more commercial work this year,” says Pearl. “Whether it’s fleet vehicles, signage, window graphics, wall coverings or store deployments. This is how we continue to move forward and grow at a rapid pace. Businesses and large entities understand inflation better than average, so charging them accordingly with inflated material costs isn’t as difficult.
Sharyn Volpe, co-owner of Frederick Window Tinting in Frederick, Md., says it’s too early to predict the damage the rise could inflict on the industry.
“Business has been pretty much the same as before,” she says. “We are doing about the same amount of work as in previous years. However, we do not book several weeks as before; these are more daily calls.
There’s a 72% chance the Federal Reserve will cause a recession by 2024, according to Bloomberg Economics. In February, models predicted almost no chance of a downturn by that time. Pearl considers a recession “inevitable” and wishes the best for her colleagues in the industry.
“We just keep moving and pushing, hoping that we can keep our businesses profitable,” adds Pearl. “With dynamism and creativity, we succeeded. I hope the rest of the stores around the world can do the same.
Joshua Huff, Editor, and Chris Collier, Associate Editor, contributed to this report.