MADISON (WKOW) — The Federal Reserve Board said Wednesday it was raising interest rates by 0.75%, the biggest hike in 28 years to help stem soaring inflation.
“You’re raising interest rates to kind of slow down spending in the economy, to make borrowing more expensive,” said UW consumer finance expert Cliff Robb.
Robb explains that this rate hike will limit purchasing power, which should help stabilize the prices of goods and services
“It needs to be spent probably a little bit less than what we’ve had and we’re really at a point where there are just too many dollars for goods available in the market,” Robb said.
“Price impact is everywhere”, Johnathan Dye, owner of Mr. Dye’s Pies said.
Inflation has forced Dye to raise prices because his expenses like fuel are skyrocketing.
The cost of driving to different locations increased with the main ingredient of his signature pie – limes. They used to cost $40 a case, but now they’ve quadrupled in price.
“Mexico key limes, they got up to $120 for a case,” Dye said.
According to experts, exactly how you will be affected depends on whether your savings, home loans, credit cards or student loans have fixed or variable interest rates.
“For example, credit cards, these are often variable rate product types, which may very well be tied to an interest index that increases as that index increases,” said Heather MacKinnon, vice president of Wisconsin Bankers Association Legal Affairs.
If you have a variable interest rate product, now might be the time to ask a financial expert to help you answer these questions.
“Is the Floating Rate Index tied to what the Fed actually changes? What is the parameter? How fast can it go up? What is the cap? Are we already at that cap level?” asked MacKinnon.
UW Finance expert Cliff Robb also said Wednesday’s rate hike should take effect fairly quickly.