Explained: U.S. Feds raises interest rate by 75 bps and its impact on you

The Fellowship of Penny Calling Penny
June 16, 2022
US Federal Reserve Raises Interest Rates

Disclaimer: Penny Calling Penny is an affiliate website. This means that we get a small commission when you click some of the links in this article. Don’t worry – we’ll never recommend anything we wouldn’t use ourselves.

The U.S. Federal Reserve has hiked its main interest rate by 0.75 percentage points on Wednesday, the largest increase since 1994 to fight the inflation that is running at a 40-year-high.

The move comes after inflation reached a 40-year high and the Feds are aiming to tame the inflation without tipping the economy into a recession.

Federal Reserve Chairman Jerome Powell said the 75-basis-point hike was due in part to the Federal Reserve’s worried about inflation expectations increasing.

“We at the Fed understand the hardship that high inflation is causing. We are strongly committed to bringing inflation back down and we are moving expeditiously to do so,” Powell said in a press briefing on Wednesday.

More From Penny Calling Penny
How to Invest During Inflation? Let’s Look Into its Various Means
How to Make Money During Inflation? Expert Tips to Shield Your Wealth
These Banks Will Yield a Higher Return On Your Savings

So how does the last hike affect you?

The federal funds rate, which is set by the central bank, is the interest rate at which banks borrow and lend to one another overnight.

With the latest hike in the interest rate, you can expect to pay more credit card debt, car loans and student loans as borrowing is likely to get more expensive. When benchmark interest rate rises, credit card interest rates rise too

Consumers can witness the rates rise on their credit card debt within one or two billing cycling as credit card rates are closely linked with the Fed’s action on the interest rate.

Car loans and student loans will also climb. However, the rate increase depends on the type of loan you have or the type of vehicle you are planning to buy.

Fed’s decision to raise key interest rates will also impact the home mortgages. The hike in interest rate will affect the minority of households that take adjustable-rate mortgages. People with home equity lines of credit can expect to see their rate increase by 0.75 percentage points within the next 60 days. The effect on fixed-rate mortgages including the popular 30-year fixed loan is less certain.

About

Your Financial Success Starts Here

pcp-sb-2

Actionable Tips and Freebies Delivered Straight to Your Inbox! Subscribe Now!

(By subscribing, you agree to our terms & conditions, privacy policy, and disclaimer.)

You May Also Like

Was this article helpful? We'd love to hear from you!

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments
search-leftline

SEARCH

search-leftline
save 10000 in 26 weeks printable

Are you up for the challenge of saving $10,000 in 26 weeks?

save 10000 in 26 weeks printable

Are you up for the challenge of saving $10,000 in 26 weeks?

This printable tracker will guide you week by week to reach your goal of saving $10,000. Whether you’re planning a big purchase or building an emergency fund, this tracker will keep you on the right path.

(By subscribing, you agree to our terms & conditions, privacy policy, and disclaimer.)

check your email

Woohoo!

Your Printable is en route!

Check your promotion, junk, and spam folders: Sometimes, our emails can end up in unexpected folders.

Thanks

Team Penny Calling Penny!

(By subscribing, you agree to our terms & conditions, privacy policy, and disclaimer.)