If you have a balance on a credit card or an adjustable rate mortgage, you might begin noticing changes in your rates. Higher interest rates are starting to ripple through the personal finance landscape, and it doesn’t look like that trend will change anytime soon.1
The Federal Reserve has indicated it plans to keep raising short-term interest rates to help manage inflation. According to the Bureau of Labor Statistics, the CPI rose 7% last year, its highest level in 40 years.2 Energy prices jumped a staggering 29.3% over the past 12 months and you’re likely seeing the effects of inflation when buying gas. Groceries and food prices increased 8.6% and you’ll also notice an increase if you are shopping for a new or used car.3
The average individual spends 8.3% on health care expenses and retirees expenditures increased to 13.2% of their budget.4 You can use this handy calculator to compare the impact of inflation on your families personal budget.5
The Federal Reserve’s job is to control inflation. At a modest 2.5% rate of inflation, costs would double in about 28 years. By raising interest rates and also beginning to reduce the central bank’s balance sheet, the Fed hopes to slow spending, to bring down consumer prices. Time will tell whether higher interest rates will provide a soft landing for the economy.
If you have any questions about the impact of inflation or interest rates, please reach out. We’re always here to help put things into perspective.
- U.S. Bureau of Labor Statistics, Consumer Expenditure Survey, September 2021