MARYLAND (WDVM) — Inflation is the cause of the soaring prices of everyday items with no clear end in sight.
So what can be done to curb these soaring prices? Now, the Federal Reserve has responded by raising interest rates. The goal is to tame the worst inflation since the early 1980s. We’ve all seen prices increase for everyday items and our wallets have taken a heavy hit.
The Federal Reserve’s rate hike could be the long-term solution to the issue. But Dr. David Kass, a professor of finance at the Robert H. Smith School of Business at the University of Maryland, says things could get a little worse before they get any better.
“The Federal Reserve is raising the rates a quarter of a point. I would expect these rates, car loans, mortgage loans, etc, would bump up and everyday interest rates, student loans, mortgage payments, credit cards, interest rates are likely to bump up by a quarter-point,” Dr. Kass said.
Dr. Kass explains that the Federal Reserve is trying to execute what’s known as a soft landing. It could help balance out the supply and demand issues contributing to inflation. But Dr. Kass believes it’s a risky maneuver.
“The purpose of this is to slow down the economy, to try to gradually slow down inflation, but not to do it so quickly and so far so we induce a recession. That, in turn, could lead to higher or likely will lead to higher unemployment,” Dr. Kass explained.
While Dr. Kass projects multiple small interest rate increases in the coming months, some aren’t happy with any increases, especially when it comes to everyday necessities. Bonita Shankle and Nancy Moats have noticed increases in everyday items while shopping for groceries and on their monthly utility bills. The inflation has even caused Moats to dip into her retirement savings.
“Every bill you pick up has gone up some. I have to watch my pennies even though I do work an extra job,” Moats said. “I do that so I don’t have to just exist.”
Shankle echoed her friend’s sentiments questioning the reasoning behind the rate increases, which the Federal Reserve is implementing to encourage residents to save more money.
“But if you don’t have any to save, how are you going to save more? If they keep increasing the prices, what you could have saved is going into groceries and other bills,” Shankle said. “You shop as best as you can for your groceries now, it’s going to be harder as the prices go up.”
Dr. Kass says that while the Federal Reserve is planning multiple interest rate increases over the next few months, even years, many financial agencies have prepped for this and some may have even expected it.