Summary of The Effect of Fed Funds Rate Hikes on Consumer Borrowing Costs

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The Effect of Fed Funds Rate Hikes on Consumer Borrowing Costs summary
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Money has been so cheap for so long that it is easy to forget that this new normal is quite abnormal in economic history. But what will happen now that rates have finally begun their long-anticipated ascent? Federal Reserve Bank of New York economists Nina Boyarchenko, Sooji Kim and Matthew Plosser chart the impacts of rising interest rates on mortgages and come up with some likely answers. getAbstract recommends this short but sharp investigation into how monetary policy affects consumers and the real economy to executives and policy makers.

In this summary, you will learn

  • How changes to the US federal funds rate affect consumer loan interest rates in the United States,
  • Why loan maturities matter and
  • Why the credit quality of loans doesn’t.
 

About the Authors

Nina Boyarchenko and Matthew Plosser are economists at the Federal Reserve Bank of New York, where Sooji Kim is a senior research analyst.

 

Summary

An important effect of higher interest rates is their impact on consumer spending, since rising rates could temper consumption. However, the federal funds rate, which the Federal Reserve targets, and retail loan rates, such as banks’ competitive home mortgage rates, are not directly linked. A study ...

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