FED Hikes Interest Rates, What Nebraskans Should Know

March 21, 2022, 5 p.m. ·

Different bills are shown in a pile of US currency
The Federal Reserve raised interest rates by 0.25% last week. (Photo by Alexander Schimmeck on Unsplash)

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The Federal Reserve raised interest rates 0.25% last week.

The U.S. central bank decided to raise interest rates for the first time since 2018. The hike in interest could be followed by six additional increases throughout the year. In total, the federal bank eyes a 1.9% interest rate by the end of 2022, with three more increases in 2023.

PJ Kim is an assistant professor of finance at Chadron State College. Kim said the central bank’s decision aims to slow inflation, although it will take a couple of months before the economy changes.

“Customer prices will not fall for the time being, even if the inflation effect is partially resolved,” Kim said. “This is because it includes factors due to supply shortage compared to demand.”

Kim said it’s important to focus spending money on what you need over the next few years. He said the war in Ukraine and other foreign relations issues need to be resolved for prices to fall.

Floating rate loans, or borrowing money at a changing interest rate, will become more costly. Because of this, Kim said people should be aware of their credit card balances.

“If you primarily use your credit card for your living expenses, then please pay off the balance every month,” Kim said. “Don’t carry the balance to the following month. Otherwise, you will be paying more interest than before.”

Kim said to consult with the bank or entity that you borrowed from, to see whether your rate will change. Even though spending carefully is important, Kim said the changing interest rate means it could be a good time to invest in the stock market.