As the economy recovers from the global pandemic, American families and businesses are experiencing higher prices.
The Federal Reserve’s Federal Open Market Committee that it would seek to adjust interest rates higher to address inflation. The Committee also indicated that it will likely continue to raise interest rates in the future, based on market conditions. These interest rate adjustments by the Fed tend to flow through the economy in ways that may impact borrowers and savers.
The Consumer Financial Protection Bureau is the arm of the Federal Reserve System that is fully focused on consumers, ensuring that markets are fair, transparent, and competitive. Here’s what consumers should know:
1. The cost of some loans will go up.
The interest rate on existing credit products may go up if you have a variable rate. For example, many credit cards have variable rates. That means you’ll pay more on your card balances. In addition, banks frequently hike rates for new loans, as well, after the Fed raises rates.
If you currently have a fixed-rate loan, your payments won’t change. For example, most outstanding mortgages have a fixed rate, and those borrowers will typically make the same payment as always.
2. Watch the rate you’re earning on your deposits.
In a well-functioning market, families with savings should expect to earn a higher interest rate. While large banks are often quick to raise rates on borrowers, they are often slower to pay higher rates to consumers on their deposits.
If you have savings, you should consider looking at banks and credit unions, especially ones that will value their relationship with you, that may be offering higher rates. Remember, you don’t need to move all of your money at once and you’ll want to be sure you’re tracking any automatic debits you have in case you need to transfer them.
In this time of rising rates, the CFPB is going to be focused on whether markets are competing for your business. We’ll also be closely monitoring lending markets where rising rates and inflation are most likely to impact American families and businesses.