Structured Finance Association CEO Michael Bright discusses what would happen for American families if the Fed raised interest rates on ‘Fox Business Tonight.’
The Federal Reserve is expected to raise interest rates this week for the first time since late 2018, and economists anticipate further hikes throughout the year as policymakers seek to combat soaring inflation.
The Federal Reserve building in Washington. ((AP Photo/Patrick Semansky, File) / Associated Press)
While the central bank’s actions are closely monitored by Wall Street, folks on Main Street will be impacted, too.
An increase in interest rates means higher borrowing costs, so consumers and businesses can expect to pay more for car loans, mortgages, and credit card balances. Those additional costs cause shifts in consumer behavior.
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John Lonski, president of Thru the Cycle and former chief capital markets economist at Moody’s Analytics, says consumers might not feel the pain of an initial rate increase by the Fed, but they will certainly notice the hikes if they continue through 2022.
Federal Reserve Chair Jerome Powell listens during a Senate Banking Committee hearing on Capitol Hill in Washington. (Al Drago/The New York Times via AP, Pool / AP Newsroom)
Although a series of rate increases are expected, forecasting the Fed’s behavior for the rest of the year is “a fool’s errand” given the uncertainty with Russia’s war on Ukraine, Lonski told FOX Business.
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In the meantime, he says that anyone carrying credit card debt should work to pay down balances and that folks considering the purchase of a house should not put it off – although sky-high home prices have already made ownership unaffordable for many would-be buyers.
But rising interest rates could have a silver lining for Americans overall in the way of bringing inflation under control, which has a direct impact on your wallet.
Michael Bright, former president of the Government National Mortgage Association (Ginnie Mae) for U.S. President Donald Trump, listens during a Senate Banking Committee confirmation hearing in Washington, D.C., U.S., on Tuesday, July 24, 2018. (Photographer: Andrew Harrer/Bloomberg via Getty Images / Getty Images)
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“Inflation eats away at consumers’ ability to pay their debts, it eats away at their ability to service their normal household needs,” Structured Finance Association CEO Michael Bright told “FOX Business Tonight.”
“It gets you either way,” Bright said. “You can raise rates and squash inflation, but then borrowing costs go high. Or, you can let inflation run a little bit higher than it should…and that eats away at your ability to purchase.”