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By Leila Lajevardi • May 21, 2018

The Effect of Rising Interest Rates

In the past two years, credit card rates, mortgage rates and auto loan rates have reached new highs, not to mention that oil prices are triple the cost of two years ago as they continue to rise. The effect of these rising oil prices however does not remain contained; instead, we are confronted with it’s effect in the biofuel industry, in turn, increasing crop prices and making food less affordable. The effects of rising rates does not remain in a bubble but instead has a rather rippling effect as it permeates into the everyday life of Americans.

 

The rising interest rates have been largely accounted for by the increased market demand, but such strong demand can only carry on for so long. The Fed Board of Governors advocates that the increasing rates result in credit card delinquency at smaller banks that will continue to increase as rates increase. The last time we saw such a large percentage of delinquency was in 2008-2009 when the recession had reached its peak. Lastly, another factor for higher interest rates is due to an expected increase in borrowing by the US treasury because of the massive budget deficit after last year's tax cuts. Individuals will feel the brunt of these increasing rates harder than ever as we will continue to witness the market fluctuate.

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