The U.S. central bank effectively increased its key interest rate by 75% to slow the economic recession and combat the inflation rate. How does it affect your money?
Following the announcement of the Fed officials to increase the interest rate by 75%, significant movements in the U.S. stock market and a sell-off were also observed. The increased interest rate hike announced on Wednesday was the 4th time this year.
Effects of Fed Interest Rate Hike. (Photo: CNBC)
In a published article on the website Next Advisor, here are 4 negative effects of the Fed rate hike on your money:
Borrowing Money Will Be More Expensive
Most Americans rely on borrowing money to meet their daily needs. However, the Fed’s decision to increase the interest rate will have negative effects on those who rely on credit cards, have auto loans, and any industry that relies on financing. They have to expect higher interest in the upcoming days.
No Savings Account, No Earnings
It is important to have savings account for emergency purposes or for any reasons. Only a few have savings account because either their salary is only enough to meet their daily needs or they spend more than what they earn. However, it is now the time to open your savings account and take advantage of the Fed’s decision to increase the interest rate.
According to the same report, the interest rate on savings will rise because of the Fed’s 75% interest rate hike. This means that the bigger you save, the larger you get through the Fed’s interest rate hike.
Unemployment and Recession
Experts and analysts said that an increase in unemployment and economic recession is expected to happen in the upcoming months. CFP Kimberly Howard said, “We have a long ride, still to go, and a lot of pain ahead.”
Due to the aggressive decision of the central bank, it will be difficult for the different businesses to borrow money to expand their business. Why? Because it will also be hard for them to pay the borrowed money considering the higher interest. This will result in unemployment and later on economic recession.
Volatility in Stock Market
The U.S. stock market had experienced already volatility even before the Fed’s decision to increase the interest rate. Unfortunately, there was more volatility after the Fed’s decision and some investors got panic. But there are some analysts and experts who believe that this will be over soon.
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