DENVER — Americans should be prepared to pay higher interest on their loans. On Wednesday, the Federal Reserve raised its benchmark rate in an effort to rein in rising prices for commodities like food, gasoline and even lumber.
In short, the Fed raised interest rates in an effort to keep consumers and businesses from spending so much. Eventually, prices are expected to fall.
Chris Hughen, professor of finance at the University of Denver, explained what consumers can expect after this decision.
“[The Fed is] also trying to maximize employment and create an environment conducive to economic growth,” Hughen said. “What they did today was really thread the needle.
Hughen said consumers will see higher borrowing costs, which means higher interest rates for credit cards, student loans, auto loans, adjustable rate mortgages and lines of credit. on home equity.
“Now is a good time to use assets – money to pay off your home equity line of credit, as well as your credit card loans – before these interest rates really start to impact your budget,” he said.
Hughen said if the Federal Reserve is aiming for a long-term goal of lowering inflation, he predicts costs are likely to get worse before they get better.
“The bad news is that we’re likely to continue to see price increases throughout 2022. The supply chain crisis isn’t going to end anytime soon,” he said. “The good news is that 2023 is looking much better, and most economists expect price increases to come back down to around 3% or 4% next year. So it will be a difficult year, but I hopefully we will see the easing of these price increases over the next year.”