The Federal Reserve has raised interest rates another half a percentage point in an effort to curtail the highest inflation the country has seen in four decades.
It’s right on target with what Ball State economist Mike Hicks was predicting would be the case as the Fed takes measures to discourage people from borrowing any more money.
“We’ll see consumers spending less in any instrument they have to borrow in,” Hick said on WISH-TV. “The intent of that is to dampen inflation before it runs away for multiple years.”
Hicks anticipates that it may take up to a year for inflation to return to its normal 2-percent range under higher interest rates. He said the Fed had to raise rates again to really drive home to consumers that this needs to happen in order to stop inflation from getting worse. So, in the meantime, if you have credit card debt or mortgage you might be paying a little more for a while.
Hicks recommends that if you are able that you pay off as much of your credit card debt as you can and if you have a mortgage you consider renegotiating or refinancing.
But, the good news is that this period of higher inflation is only a blip on the radar.
“We are still talking about inflation and borrowing costs that are far lower than earlier generations experienced,” Hicks said. “It’s certainly not the crisis that the inflation rate per month or two that looks like the early 1980s. We saw it sustain levels like this for six, eight, and 10 years running, and we’re not anywhere near that way right now.”
Hicks expects inflation to really start dropping by the end of May.