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What the Fed's interest rate hike could mean for your credit card rates

“Everyone that has outstanding balances on their credit card should pay attention to that interest rate,” Memphis economist Dr. David Kemme said.

MEMPHIS, Tenn. — The Federal Reserve said it was looking at increasing the interest rates again, but some elected leaders like Elizabeth Warren say this could potentially lead to two million Americans losing their jobs.

Memphis economist Dr. David Kemme said the Federal Reserve’s goal by raising interest rates is to slow down the demand of consumers without triggering a recession. The Fed said they wanted to do this more frequently.

“It’s like cutting something with a dull knife,” said Kemme.

A concern being raised by this plan, Kemme said, is the impact it could have on American jobs. 

“It will be in sectors of the economy that are most interest rate sensitive, which means construction and new homes,” said Kemme, who adds if the interest rates continue to rise, adjustable rates on things like credit cards, mortgages and home equity loans will do the same.

This could make it harder to pay off credit card debts and buy homes.

When interest rates were 3% in 2021, homebuyers could have had a $400,000 mortgage. This year, that same amount would only cover $248,000, now that rates are as high as 7%.

“Those rates are going to go up,” said Kemme, “Everyone that has outstanding balances on their credit card should pay attention to that interest rate.”

Economists are recommending people in the Mid-South make adjustments, and do not borrow on adjustable rate loans, instead consider fixed rates.

Also, once the debt is paid down, look for another credit card with a better rate.

“This is a real competitive aspect of credit cards,” said Kemme.

At the grocery store, economists say while inflation rates are slowing down, the prices are expected to stabilize.  This does not mean prices will go down again, meaning what we see on the shelves are likely here to stay.

“So the products in your grocery store, the prices are going to stabilize,” said Dr. John Gnuschke from the University of Memphis, “That stabilization should really take effect in the summertime.”

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