DENVER — Americans should prepare to pay higher interest on their loans. On Wednesday, the Federal Reserve raised its benchmark rate in an effort to curb rising prices for things like food, gasoline and even lumber.
In short, the Fed's increased interests rates in an effort to keep consumers and businesses from spending as much. Eventually, prices are supposed to drop.
Chris Hughen, a finance professor at the University of Denver, explained what consumers can expect following this move.
"[The Fed is] also trying to maximize employment and create an environment for economic growth," Hughen said. "What they did today was really thread the needle."
Hughen said consumers are going to see borrowing costs increase, which means higher interest rates for credit cards, student loans, cars loans, adjustable rate mortgages and home equity lines of credit.
"Now's a good time to use assets — cash to pay down your home equity line of credits, as well as your credit card loans — before those interest rates really start to impact your budget," he said.
Hughen said while the Federal Reserve has eyed a long-term goal of lowering inflation, he predicts costs will likely get worse before they get better.
"The bad news is that we're probably going to continue to see price increases throughout 2022. The supply chain crisis is not going to end anytime soon," he said. "The good news is that 2023 looks much better, and most economists are expecting price increases to go back down to about 3 percent or 4 percent in the next year. So this is gonna be a tough year, but hopefully we'll see some mitigation of these price increases in the next year."