MILWAUKEE — In an effort to control the rising inflation rate that is hitting everyone’s wallets, the Federal Reserve raised interest rates. A local economist weighs in on what this means for your wallet and when we could see a change in prices.
It is a problem that everyone is dealing with and the Fed is desperate to solve: the rising inflation rate.
“Everything just went up,” said Cassandra Pearson, a Milwaukee resident. “More money in rent, gas, food; I noticed food prices went up.”
“Internet has definitely up and WE Energies has gotten more expensive,” said Morgan Imhoff, a Milwaukee resident.
Right now, the rate of inflation is at 8.3 percent for August. The goal of the Federal Reserve is to get it around 2 percent.
Many people are feeling inflation every day. Although the price of gas is down from when the national average of regular unleaded hit its record high of $5.01 in June of 2022, according to AAA, it is still up 16 percent from a year ago. That isn’t the only thing rising. The cost of electricity is up 15.8 percent, the cost of rent is up 6.7 percent and the cost of groceries are up 13.5 percent.
It’s why Marquette University economist and expert in the Federal Reserve, Jim McGibany, said the Fed raised the interest rates by .75 percentage points for the third meeting in what is considered a very aggressive move. That means it will now cost you more to borrow money for things like a house, car, appliance or credit cards.
“What they can do is slow the economy down by making it tougher for people to spend money,” said McGibany. “It is going to have a negative effect on certain parts of the economy related to interest rate spending like borrowing and possibly the labor market, and that’s what they are trying to do is get the labor market to slow down.”
“It might be tougher to find a job or keep your job or maybe get a higher wage,” said McGibany.
On top of that, he warns that you shouldn't expect an immediate change in inflation.
“What the Fed does [is it] takes six, nine, maybe 12 months to get the full effect. So they started doing this in earnest maybe in late spring and early summer, so it is going to take a while for those prices to come down,” said McGibany.
For people like Pearson who is already working two jobs, she says she can’t afford things to get more expensive than they are now.
“I wouldn’t be able to afford a lot of things right now and it's already high. It's going to make it more difficult,” said Pearson.
McGibany says he and many other economists believe the Fed could slow down the economy so much that it will cause a recession. However, Federal Reserve chair Jerome Powell says he will not stop raising rates until he gets inflation back down to two percent.