Rate Hikes and Record inflation are two topics top of mind for many Americans right now. The Federal Reserve raised rates once again last week. Leaders hope the raise will fight ongoing inflation. Now, the Federal Reserve’s benchmark is between 2.25%-2.5%. Economists say everyone will feel the impact of the interest increase, although it may take some time.
Rate Hikes: How Will The Increase Impact You?
The most significant impact of the increase will be on those trying to become homeowners. Specifically, the cost to mortgage a home is going up. Federal Reserve Chair, Jerome Powell, hopes by making borrowing more expensive, the Federal Reserve will succeed in slowing demand for homes and other goods and services. Specifically, Americans needing a new vehicle will pay more to hit the road. Also, Americans with credit cards should expect interest rates to rise within two billing cycles.
The uncertain economic times also have Americans thinking of the financial future. The Federal Reserve’s move now means you can earn more on bonds, CDs, and other fixed income investments. However, inflation is impacting 401k plans and crypto investments. The Associated Press reports that savings, certificates of deposit, and money market accounts do not typically track Federal Reserve changes.
Record Inflation: Ongoing Impacts
American’s finances aren’t just impact by the Federal Reserve’s action. Household incomes are taking hits from every direction thanks for record inflation. You may remember inflation increased to 9.1% in June. In the southeast, inflation is even higher, reported at 9.8%. John Dove, an Economics professor at Troy University, expects things to get worse.
“If this inflation does continue, especially with these rates being the highest we’ve seen in 40 years, then if your wages aren’t rising to meet that inflation and offset those increases …. ultimately each and every one of us will be a little poorer.
John Dove – Economics Professor, Troy University
Americans are also feeling the effects of inflation inside the house. Inflation is still impacting the energy market high, keeping prices higher at gas pumps. High energy prices mean household utility bills are higher as well. Ongoing supply chain issues and the War in Ukraine drive Record High energy costs.
Social Security Beneficiaries are also taking a big hit in the inflated economy. Those who live on fixed incomes see that income stretch less and less. Economists think that will change with the subsequent cost-of-living adjustment. Click here for 2023’s COLA estimate