Increase in Interest Rate: Why Was The Interest Rate Raised By The Feds?
This interest rate hike was the seventh in the US this year.2022 is almost over and as it’s closing in, it will be remembered best for the cost of living crisis that overwhelmed the United States, especially during the summer months, followed by the 2-year pandemic.
During the first 2 months of the year, the United States witnessed a shortage in the supply chain and saw the price of everyday grocery items increase by a large amount. Nonetheless, the struggles the country experienced were compounded when it decided to strictly impose sanctions on Russian oil imports followed by its invasion of Ukraine in March.
The price of gas increased across the country with the average price for a gallon of gas surpassing 5 dollars in June for the first time in US history. These were the result of the sanctions made. With America having a cost of living crisis, the Federal Reserve implemented a sequence of interest rate hikes that ultimately hindered the progress of the rapidly increasing
Inflation made the price of necessities lower, such as gas, groceries, and electricity, so it benefits everyday Americans. On December 15, Wednesday, 2022, the Federal Reserve made another interest hike from 4.25 to 4.5%.
Increase in Interest Rate: Why Is This Important To You?
According to a published post by Marca, the higher the interest rate, the more the borrowing cost goes up, which means the interest payments on loans are higher than before. The interest hikes recently have already caused havoc on the housing market, with few Americans now being wary about homeownership given the higher interest payments.
From the latest hikes given, one of the most advisable step anyone could follow is to pay down any variable debt such as credit card debt. Credit cards have a variable interest rate, which means those rates are linear to the federal reserve’s benchmark.
With the increase in interest rates set to continue in 2023, most US citizens will most likely avoid buying expensive items and making any large purchases such as cars and houses.