The Fed may become more aggressive in fighting inflation. How to prepare

For most Americans, the rising cost of living weighs heavily on their wallets.

“Wage growth has failed to keep pace with the dizzying pace of price growth that the US Federal Reserve has effectively identified as the ‘No. 1 enemy of monetary policy,'” said Mark Hamrick, senior economist at

After the Fed raised interest rates for the first time in more than three years, President Jerome Powell promised tough action on inflation, which he said jeopardized an otherwise strong economic recovery.

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Now the expectation is that the central bank can raise interest rates by half a percentage point at each of its meetings in May and June.

Each move will correspond to an increase in the key interest rate and will immediately increase the financing costs for many forms of consumer lending.

What you need to know to raise interest rates

Because 15- and 30-year mortgage rates are stable and linked to government yields and the economy, homeowners will not be immediately affected by a rate hike. However, anyone shopping for a new home will pay more for their next home loan (the same goes for car buyers and student loan borrowers).

“Mortgage rates have been rising steadily for a month now, due to inflation and the Federal Reserve trying to control inflation,” he said. Holden Lewis, home and mortgage specialist at NerdWallet.

“Just a few months ago, most meteorologists predicted that rates would rise all year round, but they would not reach 5%,” he added. “Well, we are approaching 5% in just a quarter of the year.

“Interest rates will continue to rise until investors see inflation fall.”

Here are three ways to stay ahead of rising prices.

1. Pay off the debt

If you have a balance, try calling your card issuer for a lower interest rate, switching to a zero-interest balance transfer credit card, or consolidating and repaying high-interest credit cards with a low-interest equity loan or personal loan.

“Even if you had to borrow some of your mortgage, you would at least pay a lower interest rate,” Jones said.

2. Postpone large purchases

“One of the questions people have to ask themselves is ‘is this the right time to make a big purchase?’ said Jones. “It will cost more to buy the thing and it will cost more to finance.”

For items with large tickets, such as a house or a car, “it may make sense to postpone,” he said.

Although mortgage rates are rising, the cost of buying a home is rising even more – as the price of a home more than doubled last year.

The same goes for car purchases. New and used car prices continue to rise amid strong demand and limited stocks and show no signs of slowing down any time soon.

3. Boost your credit score

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