The Federal Reserve It is expected to raise interest rates this week for the first time since late 2018, and economists expect more hikes throughout the year as policymakers seek to combat high inflation.
While the central bank’s actions are closely watched by Wall Street, people on Main Street will also be affected.
Higher interest rates mean higher borrowing costs, so consumers and businesses can expect to pay more for car loans, Mortgagesand credit card balances. These additional costs cause shifts in consumer behaviour.
John Lonsky, president of Thru the Cycle and former chief capital markets economist at Moody’s Analytics, says consumers may not feel the pain of an increase in initial interest rates by the Federal Reserve, but they will certainly notice increases if they continue into 2022.
Although a series of rate hikes are expected, predicting the Fed’s behavior for the rest of the year is a “foolish task” given the uncertainty over Russia’s war on Russia. UkraineLonski told FOX Business.
In the meantime, he says, anyone with credit card debt should work to pay off the balances and that people considering buying a home shouldn’t put it off — even though very high home prices have already made the property unaffordable for many potential buyers.
But higher interest rates can have a positive side for Americans in general in the way they are brought in economic inflation Under control, which has a direct impact on your portfolio.
“Inflation undermines consumers’ ability to pay their debts, and their ability to meet their normal household needs,” said Michael Bright, CEO of the Structured Finance Association.Fox Business Tonight.”
“It makes you both ways,” Bright said. “You can raise rates and crush inflation, but then borrowing costs go up. Or you can allow inflation a little higher than it should… and that undermines your ability to buy.”