![]() ![]() New loans aren’t the only debt that’s costing more. Payments will go up on adjustable-rate loans.Rates on a 30-year mortgage, for example, surged past 6% in September, nearly double their rate a year ago. Just as banks are paying more in interest to depositors, they’re charging more to borrowers. Higher interest rates typically lead to a strong dollar, which could lower the price of imported goods and also make it cheaper for Americans traveling overseas. Higher interest rates could tamp inflation, leading to lower prices on everything from gasoline to houses. Consumer prices in November 2022 were 7.1% higher than they were in October of the previous year. One of the main factors driving the Federal Reserve to push interest rates up is concern over inflation, which is at a 40-year high. ![]() Regular benefits and entitlement payments such as Social Security are indexed to inflation and these will rise with higher interest rates. Fixed income securities tend to offer higher rates of interest as well. Banks typically increase the amount of interest they pay on deposits over time when the Federal Reserve raises interest rates. Here’s a look at the pros and cons of rising interest rates, and how you can take advantage of a rising rate environment. But while higher interest rates can make it more expensive to borrow and could hamper overall economic growth, there are also some benefits. Higher interest rates typically slow down the economy since it costs more for consumers and businesses to borrow money. Fortunately, there are signs that inflation, while still high, may be slowing: the Producer Price Index for services, for example, showed its first decline in two years. The Fed raised its benchmark fed funds interest rate, which banks use to determine the interest rates they charge consumers, several times in 2022 and indicated it will continue raising rates until the economy cools substantially. Financial Insights About Us Customer Service Online Banking Login Branch & ATM Locator SearchĪfter more than a decade near historic lows, interest rates have been heading upward as the Federal Reserve seeks to put a lid on the highest inflation in more than 40 years, which has hit consumers in the pocketbook for things like groceries, clothes and appliances.Additional Sources of Capital for Small Businesses. ![]()
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