Inflation hit another 40-year high in February with consumer prices rising 7.9% annually. Although the Federal Reserve is planning to implement more policy rate hikes in 2022 to curb the surge in inflation, Treasury Secretary Janet Yellen expects the acceleration in prices to continue to impact consumers throughout the year. .
“We are likely to see another year where 12-month inflation numbers remain very uncomfortably high,” Yellen told CNBC’s “Closing Bell” on March 10.
Yellen previously told NPR that inflation would slow in the second half of 2022, but “a lot of uncertainty” during the Russian invasion of Ukraine prompted her to revise her previous predictions.
“We have seen a very significant increase in gas prices and my guess is that next month we will see further evidence of the impact on US inflation of Putin’s war in Ukraine,” Yellen said.
In addition to the impact on gas prices, Yellen said the Russia-Ukraine conflict could drive up food costs as both warring countries are major grain producers.
Read on to learn more about how the Fed plans to fight inflation and how you can offset rising consumer prices. And if you’re looking to take advantage of current interest rates ahead of Fed hikes, you can visit Credible to lock in favorable rates on mortgages, student loans, and personal loans.
MOST AMERICANS ARE OPTIMISTIC ABOUT THEIR FINANCES IN 2022 DESPITE INFLATION, SAYS A SURVEY
High inflation is likely to drive interest rates up
The annual inflation rate is climbing well above the Fed’s 2% target, according to the consumer price index (CPI). In an effort to curb consumer prices, Federal Reserve Chairman Jerome Powell predicts the central bank will raise the federal funds rate several times in 2022.
This could raise interest rates on a number of financial products, such as mortgages, auto loans, credit cards, personal loans, and private student loans. Higher interest rates result in less favorable loan terms, making financial products more expensive to repay over time.
The Federal Open Market Committee (FOMC) economic policy has already caused interest rates on some types of loans to rise. For example, 30-year mortgage rates increased from 3.11% at the end of 2021 to 3.85% for the week ending March 10, according to Freddie Mac. Fixed student loan refinancing rates also increased to high point since 2020, show credible data.
As interest rates continue to rise, it is more important than ever to look for rate quotes when borrowing money. You can compare the rates of multiple lenders at the same time on Credible and find the best possible deal for your financial situation.
CREDIT CARD CONSOLIDATION CAN SAVE THOUSANDS AS THE PERSONAL LOAN RATES ARE LOW RECORDS
How to offset the financial impact of rising prices
Inflation doesn’t just translate into higher prices, it lowers the value of your hard-earned cash. While asking for a raise at work can help offset the price increase, it’s not always a viable option. Here are some other ways to reduce the financial consequences of inflation:
Learn more about each strategy in the following sections.
Keep an eye on your family budget
Prices are rising rapidly on a range of consumer goods, from gas to food. Inflation can make it difficult to balance family budgets, potentially leading some families to rely on high-interest credit card spending. During times of price inflation, you may need to keep track of your budget more closely to avoid piling up debt.
One way to simplify the process is to download a free budget app that links to your bank accounts. Keeping track of your expenses can help you identify savings opportunities so you don’t have to take out revolving credit card debt to cover the necessary expenses. You can search for free budgeting software in your smartphone’s app store.
CAR INSURANCE RATES “ARE NOT TRAINED” DESPITE THE ANNUAL INFLATION OF 4%: REPORT
Keep your money in diversified investments
Inflation can cause volatility in the stock market, directly impacting the long-term value of your investments. Many consumers are frightened by short-term market conditions, withdrawing money from their equity portfolios and index funds for fear that they will fall further. But this can be a risky move.
One way to protect your finances from inflation is to diversify your investments. Meet with your financial advisor to review your asset allocation so that your investment portfolio is less vulnerable to inflation-related market downturns.
AVERAGE HOME INSURANCE RATES RISE FASTER THAN INFLATION AND YOU CANNOT SLOW DOWN
Pay the debt on more favorable terms
Data from the New York Fed suggests that Americans are becoming increasingly dependent on high-interest credit cards amid surging inflation. But revolving credit card debt can trap borrowers in a repayment cycle that takes time and money, especially as Fed officials are poised to initiate an interest rate hike.
One way to pay off credit card debt is to consolidate into a personal loan with better terms. Personal loans typically offer lower interest rates than credit cards, and two-year personal loan rates are currently at historic lows. Additionally, personal loans offer fixed interest rates and predictable monthly payments, which can allow you to pay off credit card balances faster while saving you money on interest.
Personal loan lenders set interest rates based on a borrower’s prime rate and creditworthiness, including factors such as credit score and debt-to-income ratio. You can visit Credible to compare interest rates across multiple lenders for free without affecting your credit score. Then, you can use a personal loan calculator to estimate your potential savings.
POLL: DEADLINE FOR TAX CREDIT PAYMENTS HARDLY REFLECTS DEMOCRATS
Got a finance-related question but don’t know who to ask? Email credible money expert a email@example.com and your question may be answered by Credible in our Money Expert column.