How to Talk to Your Audience About Interest in 2023
Since it began being used as a monetary policy tool in 1979, the federal interest rate has remained at the heart of every financial service and product, despite whether it was explicitly top of mind or not. However, when rates began rising in 2022, public interest understandably rose with them. Today, the Federal Funds Rate (FFR) has returned as an integral factor in financial goods and services and is being used to contextualize everything from savings accounts to mortgages to a possible coming recession.
As a consumer, knowing the FFR is important (in the first quarter of 2023, it sat between 4.25 and 4.5 percent). But knowing the number devoid of context strips it of its agency and devalues any understanding of where the market could go next. As advertisers in the financial sector, that’s where you step in. Knowing what the FFR is, what it was, and where it’s going are important questions to answer before you can decide on how best to position ever-changing interest rates when speaking to potential customers. Educational insight through sponsored content can then be used as the framework to build trust and, ultimately, sell your services.
A Federal Funds Rate Crash Course
The effective Federal Funds Rate is a weighted average of all rates charged by the banks for lending to other banks across the country. Many consumers don’t realize every rate of borrowing is based on the FFR, from mortgages to auto loans to credit cards. It also affects the value of the dollar. In short, the FFR is the most important and influential interest rate in the world.
While it’s true the US is currently experiencing high rates of inflation, it’s not unprecedented. In fact, today’s inflation crisis is nothing when compared to the late 1970s, when inflation regularly crested double digits. The Fed began adjusting the interest rate aggressively in 1979 to bring inflation down, which worked. However, the recession of 1981 and 1982 was the price we paid to get inflation under control and the main reason why many economists suspect the Fed’s current tightening may result in a recession this year.
Today, what worries economists is not just that the Fed is raising rates, but the speed at which the rates are rising. In the 12 months of 2022, the FFR went from 0.0 to 0.25 percent to where it is now, 4.25 to 4.5 percent. What does this mean for future interest rates? Most experts anticipate rates to remain high throughout 2023, causing an uncertain economic future. Bloomberg states, “Inflation, the economy and the Federal Reserve are interdependent actors that will shape 2023…. By all signs, inflation has already peaked. But at over 7 percent, inflation still creates a lot of uncertainty about how the Fed will act in 2023 or how the economy will fare.”
How Advertisers Should Position Interest Rates in Their Media
Because interest rate discussions are ubiquitous in today’s media landscape, they need not be treated like some high-order concept difficult to understand. Rather, now more than ever, readers of financial content are looking to be educated on financial matters.
“Consumers are turning to financial content to get educated,” writes NYT Licensing. “Unfortunately, many consumers have little understanding of how finances work, whether that be related to credit, making general financial decisions or otherwise. This lack of financial understanding means that educating users on financial matters has become increasingly important.”
This curiosity on the part of the consumer places financial brands in an advantageous position. By using sponsored content that’s both educational and insightful, financial brands can help guide potential customer behavior, a proven strategy to get more eyes on your products. These aren’t just mindless clicks, either. A wide-ranging report on best practices for financial advertisers by the Customer Communications Group concluded that 61 percent of consumers’ buying decisions are influenced by custom content.
The Sponsored Content Advantage
Sponsored content turns educational insights into sales, but how you talk about your products matters. In the same way that financial advisors are barred from dispensing financial advice en masse, selling financial services and products directly through sponsored content is not only ill-advised, it’s also ineffective. Successful financial advisors know building trust is the best way to sell financial services. And while sponsored content articles can help build trust in your brand, they do so by educating, not hard selling.
Smart financial brands know not every product will work for all readers. Instead of recommending specific items, effective sponsored content highlights how savvy consumers and experts reach a decision. This is where product comparisons, explainers, tutorials and general education content come into play. When written as educational pieces with financial compliance in mind, sponsored content can walk a potential client through any pertinent subject, whether it be how interest rates affect inflation, how to prioritize debt repayment in a high-inflation environment, or the best types of investments to consider during a market slow-down. The public already wants to access this information. It’s up to you to provide it in an insightful, trustworthy way.