Local experts weigh in on newest federal interest rate spike, provide tips for consumer survival

 

DELMARVA – “There’s not a lot of tools to fight inflation that the feds have. The one they have is interest rates,” Christopher said.

The Federal Reserve has now spiked up interest rates for the fourth time in 2022.

It’s a move President of Dorchester Chamber of Commerce Bill Christopher says the feds hope will be a solution to the now 40 year record-high inflation sitting at 9%. “Money becomes tight, people stop spending as much, and as a result prices will start to come down again,” Christopher said.

That solution comes at cost, one we’re told consumers will start to feel deep in their pockets. “Immediately you’ll see your interest rates on your credit cards increase. If you want to buy a new car, used car, or a house. Any kind of credit, the interest on that will increase,” Salisbury University Professor of Economics & Finance Dr. Leonard Arvi said.

“In 2021, the student loan interest rate was 2.75% and its now at 5%. So it’s a significant increase in your student loan payback which is reflected in your monthly bills,” Salisbury Area Chamber of Commerce President Bill Chambers said.

Despite those challenges,  local business experts say there maybe some light at the end of the tunnel. “A one year CD (Certificate of Deposit) right now is making less than a point. They’re already starting to see them offered at 2-2.5%. Now, there’s actually incentives to save money again,” Christopher said.

There are also some tips for consumers to keep in mind to help adjust to these changes. “If you have debt you want to repay, pay the debt as soon as possible because your existing credit card debt will not change but the payment your making will dramatically increase,” Dr. Arvi said.

“You’re going to be paying more for that doing nothing differently. Not spending a penny more on groceries, gas, or whatever you use your credit card for you’re going to continue to see your payments go up,” Chambers said.

Chambers tells 47ABC, he expects the feds next report to show indicators that inflation will actually be on the decline but it will still be far from that goal of 2-3%.

Experts believe that prospective homeowners will also take a big hit as the average 30 year home loan has went from just over 3% in 2021 to now over 5.5% just this year.

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