Here’s what the Federal Reserve interest rate hike means for you - FindLiveJob Here’s what the Federal Reserve interest rate hike means for you - FindLiveJob

Here’s what the Federal Reserve interest rate hike means for you

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he Federal Reserve raised its key rate by a quarter point Wednesday, bringing it to the highest level in 15 years as part of an ongoing effort to ease inflation by making borrowing more expensive.

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The rate increase will likely make it even costlier to borrow for homes, autos and other purchases. But if you have money to save, you’ll probably earn a bit more interest on it.

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slowdown reflects the fact that inflation, while still high, is easing, and some parts of the economy seem to be cooling.

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But it’s still an increase, to a range of 4.5 percent to 4.75 percent. And many economists say they still fear that a recession remains possible — and with it, job losses that could cause hardship for households already hurt by inflation.

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Over the past year, consumer inflation in the United States has clocked in at 6.5 percent — a figure that reflects a sixth straight monthly slowdown but still uncomfortably high.

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The Fed’s goal is to slow consumer spending, thereby reducing demand for homes, cars and other goods and services, eventually cooling the economy and lowering prices.

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Anyone borrowing money to make a large purchase, such as a home, car or large appliance, will likely take a hit. The new rate will also increase monthly payments and costs for any consumer who is already paying interest on credit card debt.

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Scott Hoyt, an analyst with Moody’s Analytics, noted that household debt payments, as a proportion of income, remain relatively low, though they have risen lately. So even as borrowing rates steadily rise, many households might not feel a much heavier debt burden immediately.

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There are also signs that Americans are increasingly relying on credit cards to help maintain their spending. Total credit card balances have topped $900 billion, according to the Fed, a record high, though that amount isn’t adjusted for inflation.

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“Right now, most people may have jobs and rising incomes, but they’re looking to the horizon and seeing storm clouds start to build,” said Nationwide Senior Economist Ben Ayers. “It’s really an inflection point for the economy.”

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As rates have risen, zero percent loans marketed as “Buy Now, Pay Later” have become popular with consumers. But longer-term loans of more than four payments that these companies offer are subject to the same increased borrowing rates as credit cards.

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“We’re expecting inflation will still be too hot for the Fed even by the end of the year,” said Nationwide’s Ayers. “We predict it won’t be until next year that they begin to lower rates.”

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