The Fed Announced today it is likely to raise interest rates 75 basis points next week. This means a raise of .75%. Today interest rates are at 5.634% in January 2022, it was 3.45%. What does this mean? Interest rates will go from 5.634% to 6.38%, the highest in 16 years.
You are not planning to buy a home so why should you care?
Interest rates on most home equity loans and lines of credit, credit cards, auto loans, and personal loans will go up and impact the money you have available for expenses. A borrower who took out a 5-year personal loan for $25,000 at 4.5 percent interest would owe $466 monthly and pay a total of $2,965 in interest over the life of the loan. If that rate were 5.5 percent instead — 1 percent higher — that same borrower would owe $478 monthly and pay $3,652 in total interest charges an increase of $687.
But it's not just your personal obligations. Businesses both large and small will pay more for loans. Farmers borrow most years as they have expenses year round but get paid only when crops are harvested. You can see this means higher cost for everything, especially the things we all need and cannot postpone, food, clothing for growing kids, and housing.
Our only real choice is to tighten our belts and prepare now with food and non-food items and with cash on hand. High inflation leads to recession. We are already seeing recession. Cash in the bank and at home will be essential. Recessions result in higher unemployment, lower wages and incomes, increased bankruptcies, businesses failures and savings disappears. Some consumers severely cut back on spending; others cannot afford to pay their monthly credit card bills, rent or mortgage, lessons and activities for kids and on and on.
For the past few months I have had the privilege and opportunity to join Annette on America hosted by Annette Mashler Bybee. We have discussed recession, inflation, power outages, civil unrest and more. Please listen for tips.