Unclear whether Fed’s rate hike will help Latinos continue climbing economic ladder
*After seven years of a net-zero rate the Fed yesterday raised the prime. The U.S. unemployment rate is 5 percent, but for Latinos its 6.4 percent. Increases in the prime rate, according to some economists, slow hiring, and that would affect Latinos looking for work. There’s also the consideration of money becoming more expensive because of higher interest rates for mortgages, car loans, credit cards, etc … The consensus is that it’s too soon to know how the increased prime will affect Latino’s personal economies. VL
The federal interest rate has increased for the first time in nearly a decade, signaling the Federal Reserve’s confidence that the U.S. economy is improving following a Great Recession that hit Latino households the hardest.
The Fed’s move raises the interest rate from near zero to 0.25 percent, basically meaning it will cost a little more for consumers and businesses to borrow money. But it will be a little bit more profitable for people to hold or save their money.
For banks, the rate hike means banks will charge more when loaning their money. The Federal Reserve expects to continue to increase rates, but only minimally and gradually over the years.
The government lowered interest rates to near zero in 2007 as part of the effort to jump start the economy out of the Great Recession, which officially ended in June of 2009. Before the recession, the interest rate was usually around 5 percent before it was unprecedentedly dropped to 0 percent.
The question is whether or not the hike was justified, and if the economic situation for Hispanic families improved enough to deal with an interest rate hike.
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[Photo by Terrapin Flyer/DFlicker]
