The Federal Reserve on Wednesday announced a hike on the central bank's benchmark short-term interest rate to 0.25%—making this the first interest rate increase since 2018. Though this hike does not seem to create a significant change in interest rates, this is predicted to be one of the many rate hikes Americans will face this year.
Wall Street expects the Fed to boost interest rates at least six times, up to 1.25% this year.
What does this mean to your wallet?
A 0.25% hike means one would pay an extra $25 a year in interest for a $10,000 debt. As a result of the hike, credit card prices are likely to go up along with interest rates for mortgages.
Borrowers planning to buy big-budget items like cars or houses would also come across difficulties as the prices went up during the pandemic due to low inventory and high demand.
Mortgage rates seem to get the biggest hit with an increase to 4% from an average rate of 2.65%—the highest surge in this rate since 2019.
