5 impacts of inflation on interest rates | News

Like the Federal Reserve rising interest rates half a percentage point, many Americans are wondering how this decision affects their wallets.

The increase puts the federal funds rate at nearly 1%, up from 0.33%, the highest level since March 2020. The Bureau of Labor Statistics (BLS) announced in May 2022 that consumer prices increased by 8.3% over the year ending in April 2022. Restaurant and eat-out prices increased by almost 7% compared to last year, while grocery prices have increased by 10%according to the US Department of Agriculture.

The Fed anticipates the federal funds rate will reach 1.9% at the end of 2022, and 2.8% by the end of 2023. That may not seem like much, but it can significantly affect consumer spending and borrowing. Fed Chairman Jerome Powell’s goal of raising interest rates largest single rate increase since 2000 is to fight inflation, but without triggering a recession. The cooling of the housing market and the volatility of stock prices indicate that this task will prove difficult. the The rate of real estate loans over 30 years is already growing to 5% as house prices cool down in several metros.

To explain the different ways this will impact daily household budgets, PennyWorks has compiled a list of five ways inflation affects interest rates. Data sources include the Federal Reserve, Reuters and The New York Times.

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