Americans will soon face a double whammy: high inflation combined with pricier loans and credit card debt.
That shift is a response to the highest inflation in four decades, with prices— a trend that economists think is likely to continue for months. Tightening monetary policy raises the costs of borrowing for consumers and businesses, weakening demand and curbing prices.
Every 0.25% increase equates to an extra $25 a year in interest for $10,000 in debt. So if the Fed boosts rates by a total of 1% over four hikes this year, consumers will pay $100 extra annually on that debt. Precarious financial situation Because the Fed won't increase rates until March at the earliest, Americans have some time to pay down credit card debt or refinance adjustable rate loans into fixed-rate loans, saving money over the long-term.Credit card rates, auto loans
To avoid getting hit by higher credit card rates, Schulz recommends that consumers call their card issuers now and ask for a lower rate. LendingTree has found that about 8 in 10 people succeed in securing a lower rate simply by requesting one. When inflation is expected to stay high, investors are inclined to sell Treasurys because the return on those bonds, known as yields, tend to be minimal after accounting for inflation. As that happens, the selling pressure on the bonds forces Treasurys to offer higher yields to attract investors. The result can be higher mortgage rates, though not always.
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