Federal Reserve raises interest rates: What it means for your wallet

Mar. 23, 2018 5 min Read

Consumers tend to pay far more attention to the swings in their March Madness brackets than the latest moves by the Federal Reserve.

But the reality is the Fed’s action Wednesday will have more lasting impact on your wallet.

The Fed moved to raise rates by 25 basis points, as expected. The Fed’s benchmark interest rate increases to 1.5% to 1.75%.

“Job gains have been strong in recent months, and the unemployment rate has stayed low,” the Fed said in its statement Wednesday.

“Recent data suggest that growth rates of household spending and business fixed investment have moderated from their strong fourth-quarter readings.”

Charlie Chesbrough, senior economist for Cox Automotive, noted that rates on car loans are near five-year highs. But rates remain relatively affordable, particularly for those with good credit.
"Higher lending costs impact car buyers in different ways," Chesbrough said. "For customers with good credit, the monthly payment on a $35,000 five-year car loan will rise about $15 a month from a 1% interest rate increase."
"Assuming a continuation of credit tightening, subprime borrowers will see much larger cost differences,” Chesbrough said.

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