How the Fed's rate hike makes everything from cars to Thanksgiving dinner more expensive
CHICAGO (CBS) – The Federal Reserve raised its key interest rate another three-quarters of a percentage point as it battles the hottest inflation in decades.
The impact of the move on consumers is wide-ranging.
CBS 2's Chris Tye explained how everything from new cars to Thanksgiving dinner will feel the effects.
Interest rates mostly impact those buying cars and homes. But businesses borrow money too, and when the price to borrow money goes up, they're passing along the new costs to consumers.
"It's a double-whammy on consumers," said Terry Savage, a nationally-syndicated personal finance columnist and longtime CBS 2 financial analyst.
Double, in that it's one part the cost of borrowing money for cars and homes is at the highest point in two decades. And the other part is the price of everything else is already high.
"Plan for higher prices, if you can, in your budget for at least six months down the road," Savage said.
Savage added that everything from rent to heating bills are climbing.
As consumers set up their Thanksgiving table: The cost of baking is up 11%, beverages up over 5%, meat up 8%, sides are up 18%, and pies up 20%.
Overall, Thanksgiving this year will cost, on average, 13% more than last year.
But bigger ticket items are seeing the bigger jump in prices.
"Interest rates on mortgages will go up," Savage said. "We think 7% is high? I can remember back to double digit mortgage rates in the early 80s. But it will slow the housing market."
Sarah Ware, president of the Chicago Association of Realtors, took CBS 2 through a two-bedroom condo in Chicago's University Village neighborhood that's been on the market over 60 days.
"Sellers do have anxiety," she said.
Tye: "A year ago, this condo may have moved faster?"
Ware: "It may have, yes,"
That's mainly because after Wednesday's rate hike, an average 30-year monthly mortgage payment on a $400,000 home would cost another $750 more than the start of the year.
That's led to 60,000 real estate deals cancelled so far this year nationwide.
New listings are down about 19% from a year ago when rates were are record lows and houses sold in record time.
"The days are gone where you can just throw something on the market," Ware said. "Preparation is key. It's always key, but now more than ever."
Those who like to save may be the big winners here. Savage points to Treasury bills. You can put as little as $100 in and make 4.5% on it, an improvement from just last month.
It's a small victory in the priciest market in years.
