SAN ANTONIO – The highest level of inflation in decades has people across San Antonio and the country worried about the decreasing power of their paychecks, but the Federal Reserve’s series of interest rate hikes will affect you, too.
The Fed raised its benchmark interest rate by three-quarters of a point Thursday for the second time in as many months as it aggressively tries to fight inflation. That can affect how expensive it is for buyers to get a new mortgage or car loan or those who have existing debt with a variable rate -- like many credit cards.
Belinda Román, an associate professor of economics at St. Mary’s University, said that may end up forcing down the prices of homes and cars.
“Some of the research I’ve seen and some of the information coming out is that, hopefully, we’re out of the recession mid to late next year and kind of starting on our way back up economic growth,” Román said. “So, if we can wait another six to eight months, then I would definitely hold off on buying that car, buying that house. Those prices are going to have to come down, too, so that’ll be a benefit.”
She also recommends getting on a fixed rate for your credit cards or getting rid of them altogether.
A possible silver lining to rising interest rates is their effect on the yield from savings.
“The banks are not anxious to raise those interest rates, but eventually they will have to stay competitive,” said Thomas Tunstall, senior research director at the UTSA Institute for Economic Development, about banks’ interest rates for certificates of deposits.
While there’s a question over whether the country is truly in a recession yet, Román and Tunstall both believe it is, going off what the Associated Press says is an “informal definition” of a recession -- six months of economic decline. However, Tunstall notes, “so far, at least it’s very mild.”
READ MORE FROM THE AP: How the Federal Reserve’s rate hikes affect your finances
With that in mind, both say saving is a good idea.
“In the environment that’s emerging now, it’s better to be a saver than than a spender or a debtor,” Tunstall said.
The Associated Press contributed to this report