AB GhaylaneFor the first time since late 2018, the Federal Reserve is likely to raise interest rates this week, and economists expect more hikes throughout the year as policymakers aim to combat rising inflation.
While Wall Street keenly monitors the central bank’s decisions, Main Street will be affected as well.
With increasing borrowing costs, consumers and companies should expect to pay more for car loans, mortgages, and credit card balances as interest rates rise. Consumer behavior changes as a result of these increased expenditures.
Consumers may not feel the pain of the Fed’s first rate hike, but they will notice the hikes if they continue until 2022, according to John Lonski, head of Thru the Cycle and ex-chief capital markets economist at Moody’s Analytics.
Despite the fact that a series of rate hikes are likely, Lonski told FOX Business that projecting the Fed’s behavior for the rest of the year is “a fool’s errand” given the uncertainty surrounding Russia’s war in Ukraine.
Meanwhile, he recommends that everyone with credit card debt seek to pay off their bills and that anyone thinking about buying a house should not put it off — despite the fact that sky-high property prices have already made ownership unfeasible for many would-be buyers.
However, rising interest rates may have a silver lining for Americans as a whole, as they may help to curb inflation, which has a direct influence on your wallet.
“Inflation eats away at consumers’ capacity to pay their debts; it eats away at their potential to meet their basic family requirements,” Michael Bright, Head of the Structured Finance Association, told “FOX Business Tonight.”
“Either way, it gets you,” Bright added that you can increase rates to combat inflation, but borrowing prices will skyrocket. You can also allow inflation to run a little higher than it ought to be… As a result, your purchasing power is dwindling.
