: Fed’s latest rate hike comes at a vulnerable time for consumers — right before the holidays: ‘The economy is sending mixed messages’

by | Nov 3, 2022 | Stock Market

It is three weeks before Black Friday, but the Federal Reserve has likely made the post-holiday debt hangover a little more intense. The central bank made a widely expected move on Wednesday, adding another 75-basis-point increase to a key interest rate. This rate hike will be reflected in credit-card rates in December 2022 or January 2023. In other words, pay off your post-holiday credit-card balance in full.

Every year, many people accumulate credit-card debt through the holiday season, pay it off in the early part of the following year — and then repeat the process. Holiday sales could reach up to $960.4 billion, according to the National Retail Federation. That represents a 6% to 8% increase in sales on the previous year, which is inline with 2021, but slower than the 13.5% growth in 2020. What’s different in the 2022 shopping season? Economists point to 40-year high inflation, coupled with rising interest rates. The Federal Reserve hopes its four-consecutive 75-basis-point interest rate hikes will ultimately cool inflation, without sending the economy into recession. Wednesday’s rate hike takes the federal funds rate to the 3.75% to 4% range. To put that in context: It was near zero last year’s holiday season. “It’s not the time to overspend and have a problem with paying your bills later. We know the economy is sending mixed messages,” said Michele Raneri, vice president of financial services research and consulting at TransUnion
TRU,
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one of the country’s three major credit-reporting companies. It’s extra important to think through a holiday budget and how much relies on credit, she said. “People need to think about how much they can afford to repay and how long it will take to repay it.”Holiday spending could be the same as 2021 for many people — but not everyone Last month, third-quarter earnings from major banks like JPMorgan Chase & Co.
JPM,
+0.18%,
Wells Fargo
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-2.23%,
Cit …

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