Car rates

Here’s how rising interest rates could affect you

PROVIDENCE, RI (WPRI) – Financial jargon may sound complicated to many people, but Federal Reserve decisions impact all Americans and those around the world.

Interest rates have been low for years, but that should start to change in a few months.

“At the Federal Reserve, we are firmly committed to achieving the monetary targets that Congress has set for us: maximum jobs and price stability. In support of these goals, the Federal Open Market Committee has kept interest rates close to zero, ”Federal Reserve Chairman Jerome Powell said.

Rising interest rates may mean we’re in a stronger economy, but what does it mean to you?

The federal government sent stimulus checks in 2020 and 2021 in an attempt to get Americans back into the economy.

“The goal was to help people. A lot of people lost their jobs, so a lot of that stimulus was to allow people to keep making their mortgage payments, their rent payments, things of that nature, ”said financial planner Jeff Massey.

According to Massey, people were spending money and demand for products grew rapidly, which, along with the COVID outbreaks, led to supply chain issues. As a result, inflation was observed on products ranging from gas to groceries.

The federal government also invested money directly in the economy, and even before the pandemic, which led to a massive toll.

“Now they have to reverse that, and they’re doing it by slowing down the number of purchases they make each month,” Massey explained. “So by the end of March, they won’t be buying these titles anymore.”

This will likely lead the federal authorities to raise interest rates at least twice this year, and ultimately translate into higher mortgage rates and auto loans.

“Mortgage rates are expected to rise 4% by the end of 2022,” Massey said. “Now when you look at this historically it’s still very low rates. “

As it will likely not happen until after March, Massey said the best time to get the lowest interest rates on a loan would be now.

The effects of inflation are expected to slow down due to higher interest rates, as with less money available, people will not spend as much and demand for items will decrease.

Massey said his advice to those with excess money in the bank is to always invest it for the long term in an effort to grow your finances to outpace the effects of income tax and inflation. on your money.