The Federal Reserve’s decision to raise interest rates next year will have a huge impact on businesses and consumers, primarily through higher borrowing costs. The effects of such a rise in interest rates will certainly be felt throughout the US economy and possibly the world market in general.
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If you’re planning to buy a house or a car, for example, you can expect the interest rate on those purchases to rise once the Fed begins to raise rates – as it should as early as June 2022. The 30-year average sets the home mortgage rate, which has already risen at 3.24% interest, is expected to climb to nearly 4% by the end of 2022, Jacob Channel, senior economic analyst at LendingTree, told CNBC.
Homeowners who have adjustable rate mortgages or home equity lines of credit could also be affected, as both are tied to the prime rate. The potential benefit is that higher rates are likely to reduce demand for new homes, Channel added, so that “potential buyers could end up with a greater choice of homes in 2022”.
Julia Coronado, an economist at the University of Texas at Austin and founder of the company MacroPolicy Perspectives, said much the same in an interview with PBS on Wednesday, December 15 – although she expects the same. ‘a rise in interest rates is a gradual process. without a lot of sudden changes.
“Over time, as the Fed raises interest rates, consumers should see slightly higher interest rates on mortgages, on auto loans, and businesses should see perhaps terms. more stringent in obtaining funding, “she said.
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Coronado also expects a slower rate of inflation, which could mean less of a shock to consumers. And she expects the stock markets and cryptocurrency markets to cool down a bit.
“The stock market has been really strong,” she said. “We’ve seen many of you call it foam in areas like cryptocurrencies. And that kind of enthusiasm can see some cooling as the Fed stops pumping liquidity into financial markets.”
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