Many Americans are feeling the pinch of sharply higher interest rates, the result of nine consecutive rate hikes from the Federal Reserve since March 2022, which has made everything from mortgages to credit card debt more expensive.
That would reflect a 16-year high, as well as a rate that would be a full 5 percentage points higher than in March 2022.In dollar terms, every 0.25 percentage-point increase in the Fed's benchmark interest rate translates to an extra $25 a year in interest on $10,000 in debt. Higher interest rates have also impacted the banking industry. Silicon Valley Bank and First Republicafter skittish depositors pulled money on concerns about the banks' balance sheets. In SVB's case, that was partly because higher interest rates caused the bank's investments to decline in value, leading to losses and sparking fears about its stability among depositors.
In the wake of First Republic's collapse, there are worries about a"contagion" effect, with growing fears about the strength of smaller banks that have heavy exposure to uninsured deposits, which makes them more vulnerable to bank runs.