The Federal Reserve is expected to raise interest rates

The Fed’s goal is to slow inflation slowly and gently without slowing the overall growth of the US economy.

MINNEAPOLIS — With inflation behaving — or rather misbehaving — like a runaway train for months, it should come as no surprise that the Federal Reserve is expected to move to raise interest rates on Wednesday.

But none of us need be surprised when it comes to what the Fed’s action would likely mean for Americans’ money.

So what will this mean for sure?

“If you’re in debt, especially on those credit cards, those interest rates are going to go up,” said Tyler Schipper, an economics professor at the University of St. Thomas.

If the upside stays at a single increase, that’s relatively manageable for most, but that increase tomorrow should be followed by several more over the course of the year.

“.25% might not seem like a big step yet, but we’re going to see that rate increase gradually, maybe 5 or 6 times over the next year. So paying an extra 1.5% about credit card debt when you’re already struggling with it can mean a lot to the average person,” Schipper said.

The advice is that if you have credit card debt and can pay it off sooner, it will save you money in the long run.

“That could mean that mortgage rates in the future for people taking out new loans could be slightly higher, slightly higher,” Schipper said.

Higher rates for new 30-year loans are already happening and have been since the first of the year. They’re up a full percentage point year over year — about 4% — and could go up, but the projections aren’t drastic.

The Fed’s goal is to slow inflation slowly and gently without slowing the overall growth of the US economy.

“The goal here is what’s called a ‘soft landing’. They’re going to gradually raise those rates to try and find that sweet spot where it puts just enough downward pressure on prices that we get to somewhere. something more normal, but without dragging down the economy too much,” Schipper said.

The Fed’s job of bringing inflation down and encouraging growth is a delicate dance.

The process could be easier if it worked instantly, but it doesn’t. When the rate will likely change tomorrow, the Fed is then tasked with monitoring it for the next few weeks.

“It’s especially difficult because we don’t see what’s happening in the economy in real time,” Schipper said. “You make a decision, then three months later you go, ‘Well, how did that decision go? It’s like driving with your car’s rear view mirror all the time and hoping you don’t run into anything.”

So on Wednesday we’ll see the rate go up, and then we’ll see which direction inflation is going.

The things we will notice in the short term? Credit card rates, mortgages, and loans for things like a new car.

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Leslie M. Gill