With inflation at a 40-year high, how much will the Fed raise interest rates, how will that affect you?

EL PASO, Texas — The Federal Reserve will discuss raising the interest rate at a meeting Tuesday as the country faces the highest rate of inflation in 40 years.

To calm inflation, the Fed plans to raise interest rates to slow the economy and lower prices, but the question is how high that increase will be.

Tom Fullerton, professor of economics and finance at UTEP, predicts the interest rate will rise 0.75% after the Fed meeting this week. This will affect short-term loans, Fullerton says, like credit cards and student loans.

Brian Mirau, owner of Mirau Capital Management, explains: “The impact on credit card rates will be felt quickly. Most credit cards have a variable rate, so anyone with a balance, be prepared to shell out a little more just to cover the interest rates.”

Both Fullerton and Mirau suggest paying off debt now and avoiding taking on debt as interest rates rise. The Fed is expected to continue raising interest rates until inflation drops, but that raises fears that the Fed’s actions could push the country into a recession.

Fullerton says households should be careful not to take on more debt in case the labor market turns south.

“All the good job prospects, bonuses and pay raises that a lot of people have seen over the past few months are going to go away,” Fullerton explained.