With inflation at record highs, the Federal Reserve has been using one of its most powerful weapons in its fight against soaring prices: interest rate hikes. The Fed raised its benchmark rate by 0.75 percentage point in June, the third time this year and the fastest pace of increases in decades. But what does this mean for you?
Consumer debt and credit card rates rise whenever the Fed raises its federal funds rate. Lenders and creditors will only lend if they can earn more than this Fed-set rate, so it affects the rates of mortgages, credit cards and savings accounts. This is especially true for people who have variable-rate debt, like car loans and credit cards.
While some industries benefit from higher interest rates, such as banks and mortgage companies, others lose out. The financial sector as a whole often does well when rates are rising, but luxury goods, such as cars and vacations, tend to do worse.
It’s impossible to know how high interest rates will go, because there are a lot of moving parts and the economy is complex. But it’s likely that the Fed will continue to raise rates, which means it’s a good time to reassess how you’re saving and paying off your debts. Stay tuned to Select for more in-depth coverage on personal finance, tech and tools, wellness and wealth management strategies. You can also follow us on Facebook and Instagram for the latest updates.