Consumers already paying more for gas, groceries and everyday items should expect higher prices in other parts of their lives after the Fed rate increase.
Consumers are already paying more for gas, groceries and everyday items, but they should expect to fork over more in other parts of their lives after Wednesday’s interest rate increase.
Banks are required to have a certain amount of money in reserve, and when they make loans to people who want to buy homes or cars or to start businesses, they might have to borrow from other banks to make sure they maintain that reserve amount.The U.S. central bank raised rates amid a widespread sense that inflation is out of control — and, some say, beyond the Fed’s control.
The Fed’s benchmark interest rate hike will affect the minority of households that take out adjustable-rate mortgages or home equity lines of credit, probably increasing their cost to borrow. “This is the third in a series of interest rate hikes by the Fed this year and likely into next year,” McBride said. “The cumulative impact is what you have to keep in mind.”Mortgage experts said increases in the federal funds rate don’t directly affect these mortgages, but they can indirectly push fixed mortgage rates higher or lower if Fed actions influence investor thinking about how entrenched inflation is.
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