By CultureBanx Team
- Consumer prices surged 4.1% and the Black unemployment rate stands at 5.6% for the Black community, which is the highest for any ethnic demographic
- Fed rate hikes can make auto loans more expensive, along with credit cards, home equity lines of credit and other variable-interest deb
Consumer prices surged 4.1% last month from 12 months earlier, continuing to put even more pressure on the Federal reserve to figure out its rate hike strategy for the second half of the year. Even though the unemployment rate nationwide is falling, it stands at 5.6% for the Black community, which is the highest for any ethnic demographic and compounded with a rising Fed Funds rate, this could further stagnate the economic recovery for people of color.
Why This Matters: A higher Fed rate could affect your finances, even after it decided to pause rate hikes this month, ending a streak that lasted 15 months. The latest figures dashed hopes that the worst of inflation, which has spiraled out of control in the last year, was behind us with low unemployment and strong jobs numbers stoking some optimism that the worst of inflation has passed.
With inflation likely to stay elevated, the Fed may have to drive borrowing costs even higher than it now expects. A series of higher rates could tip the U.S. economy into recession. That would mean higher unemployment, rising layoffs and continued pressure on stock prices, which is likely to have a greater impact on Black people.
Not to mention that as the Fed continues to raise rates, things will stay expensive. For example, Fed rate hikes can make auto loans more expensive. Credit cards, home equity lines of credit and other variable-interest debt, rates would rise by roughly the same amount as the Fed hike.
Situational Awareness: Mortgage rates don’t necessarily move up in tandem with the Fed’s rate increases. Sometimes, they even move in the opposite direction. However, due to faster inflation the national average for a 30-year fixed mortgage has jumped from 3% at the start of the year to well above 6% now.
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