INDIANAPOLIS – In an effort to curb growing inflation across the American economy, the US Federal Reserve issued another historic interest rate hike.
The Fed increased its rate of consumer business loans to about 1.5%. That’s the biggest hike since 1994. Inflation was recorded at more than 8.5% in May. Following the decision, Federal Reserve Chairman Jermone Powell says its necessary for long term relief.
“The current picture is plain to see,” Chairman Powell said. “The labor market is extremely tight and inflation is much too high.”
Raising the interest rate is designed to slow down inflation because it can decrease demand and equal it out with the country’s supply. However, some fear that it can slow the economy down enough that it could trigger another recession.
Financial experts say inflation has already done impactful damage. Statehouse Reporter Kristen Eskow spoke to some of them to see how rising rates, and costs across the board, are affecting the Hoosier economy.
“We’ve already seen a slowdown in mortgage applications,” said Andrew Butters, Assistant Professor at Indiana University Kelley School of Business. “All of us should feel comfort that [The Federal Reserve] is taking these issues of inflation very seriously.”
Other advisors say in many situations, Hoosiers should just be prepared to pay higher interest.
“On a credit card, it just means… you’re going to start being charged more interest so your balance goes up,” said Andy Mattingly of Forum Credit Union.”
Mattingly says new homebuyers will be affected the most, along with homeowners with adjustable rate mortgages.
“We’re in the cycle where those rates are going to start going up for every lender,” Mattingly said.
Meanwhile, Indiana’s unemployment rate saw no change in May. It’s still the lowest it’s been in more than 50 years. In a new report, Indiana’s adjusted unemployment rate is at 2.2%. That’s well below the national average at 3.6%.
About 63% of Hoosiers are taking part in the labor force. The industries that saw the most growth in May were manufacturing, professional services, and hospitality.
Heather Bousey, a member of President Biden’s Council of Economic Advisers, says the “job recovery story” is reflective of the Biden administration’s policies.
“Over the course of the President’s term, the economy has added 8.7 million jobs,” Bousey said.
Watch more of the Indiana’s economic impact in the video above.