Reasons for Rising Interest Rates

The decision to raise interest rates is typically driven by a variety of factors.

Central banks, such as the US Federal Reserve or European Central Bank (ECB), often increase rates to control inflation and maintain price stability.

As the economy strengthens and demand for goods and services rises, there is a risk of excessive inflation.

By raising interest rates, central banks aim to control borrowing and spending, in order to reduce the potential for inflationary pressures.

So what does this mean to you and I?

When interest rates go up, the cost of borrowing goes up meaning a higher annual percentage rate on credit card debt, mortgages, automobile, and personal loans.

With the rising rates of borrowing money, the government aims to reduce consumer demand and spending to combat inflation.

According to CNBC Make It, the cost of food prepared at home has risen by almost 20% since April 2021.

Food prices rose 8.5% between March 2022 and March 2023, according to the most recent consumer price index (CPI) report from the Bureau of Labor Statistics.

If you pay close attention to your shopping receipts compared to 2021, you will realize how the price of bread, butter and eggs have increased partially due to the war in Ukraine in addition to rising labor costs.