WEST PALM BEACH, Fla. — The Federal Reserve raised interest rates Wednesday by 0.75 percentage point, the third hike this year and the largest since 1994.
This action is aimed at countering the fastest pace of inflation in over 40 years.
So, what does this mean for consumers?
RELATED: This is how a higher Fed rate could affect your finances
First, experts said this rate increase was long overdue.
Gas prices — and just about everything else — have been soaring this past year. Meanwhile, stocks and 401(k) plans have been sinking.
The public should be aware that simply raising interest rates won't just magically end inflation. The goal is to try to slow it down.
Mark Hamrick, a senior economist at Bankrate.com, said to look for the following things to happen immediately:
- Credit card interest could increase, which means higher monthly payments
- Home equity lines of credit could also be affected
- If you have an adjustable mortgage rate, look out for an increase
"First of all, I'd be extremely prudent about taking on more debt, I'd be extremely focused on paying off or paying down debt," Hamrick said. "We want to save more money because the returns on savings are becoming slightly more generous."
Hamrick suggests building up savings because these rising rates are also stoking fears of a recession.
He said other factors like supply chain issues and the Russian war in Ukraine is also causing inflation.
The Federal Reserve is also planning more rate hikes, which can also raise concerns about a possible recession.
"The Fed does not want to cause a recession, and it can be said — it's a bit of a tongue and cheek line — that a cure for high prices is high prices," Hamrick said.
