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Experts explain how another federal spike in interest rates will impact your wallet

Published: Apr. 25, 2022 at 10:02 PM CDT
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BIRMINGHAM, Ala. (WBRC) - The Federal Government is set to meet next week to determine another interest rate spike.

“They are clearly doing it so quickly this time because inflation has gotten so bad,” UAB Associate Professor of Economics, Dr. Josh Robinson, said.

Robinson said it’ll likely be by half a percentage point.

“There is a school of thought out there that says that is still not enough,” Robinson said. “Not a big enough hike based on the inflation we have right now. It’s not an exaggeration to say it is the worst inflation we’ve had in forty years.”

Robinson said they are going to have to raise traits more than half a percentage point to make a big difference, but you should notice small changes soon.

“With this hike we may start to see things plateau, so it won’t get worse,” he said. “This doesn’t mean prices will come back down, it just means they’ll stop going up as quickly.”

Robinson said depending on the industry, some prices will actually drop down again.

“We may see price decreases in certain sectors, those where the prices are more supply driven,” he said. “Food production, those have been more influenced by supply chain than others. Or, used cars, that is very dramatically influenced by the chip shortage and stopping the release of new cars.”

With more federal interest rate hikes likely in the future, Robinson said now is the time to start paying off debt.

“Now would be a really good time to consolidate that debt in to a fixed rate loan,” he said. “Even if the fed doesn’t get inflation under control, lenders will start to incorporate their expectations about inflation into the interest rates.”

The Federal Open Market Committee will determine the exact amount for the spike and they are set to meet May 3 and May 4.

They meet again in June.

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