The U.S. Federal Reserve has raised rates several times this year, in a bid to tamp down record inflation caused by the administration's profligate spending, as well as skyrocketing energy prices.
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While inflation may have peaked, it remains sky-high, and the Fed has shown no signals that it will start to ease interest rates.
"The increased financial cost imposes a major toll on citizens because it forces those on limited incomes to choose between food and housing or housing and healthcare," Brookings Institution Senior Fellow Darrell West said, adding that the risk of a recession comes up if businesses cut back on their workers.
According to a Pew Research poll last month, the amount of people changing addresses in May and June decreased almost 10 percent in 2022. Economists cited increased interest rates and higher rent costs as key factors for the drop.
The price of rent has surged over 26 percent from pre-COVID levels, and reached a median of US$1,876 per month in June, showed Realator.com. Meanwhile, mortgage rates have risen, and the nationwide rate for a 30-year-mortgage is higher than it has been in over a decade.
Clay Ramsay, a researcher at the Center for International and Security Studies at the University of Maryland, said that one of the worst effects of higher interest rates is on rental costs of homes and apartments.
Higher interest rates force people who could have afforded a mortgage earlier back into the rental market. In the United States, people are also dependent on car ownership to get to work and hold a job. High interest rates make new and even used cars more expensive, Ramsay said, while noting that credit unions have been able to provide rates lower than banks.
Still, raising interest rates is not likely to help slow the increased cost of food. People "can substitute less expensive food items but can't really stop buying food, and this is the most important source of suffering from inflation," Ramsay said.
Surging interest rates have also caused turmoil in the stock market. While much of the market was indeed overvalued, many Americans were not prepared for the impact after rate hikes caused some tech stocks to plunge as much as 70 percent.
However, heightened interest rates have not harmed many home sellers, especially those who are affluent. While real estate prices are coming down from their boom over the last two years, homes in areas around Washington D.C. are selling fast -- and at prices nearly double what they were in 2019.