18 March 2024
The Federal Reserve’s recent interest rate hikes have deviated from the historical norm, resulting in a net loss in interest income for U.S. households for the first time in fifty years. While increases in the Fed’s rates typically lead to a net gain for households, the interest paid on mortgages, credit cards, and other debts has surged by nearly $420 billion since March 2022, overshadowing the $280 billion rise in interest income. This shift has led to a significant reduction in household net interest income, marking a departure from past trends. Although the impact of Fed policies on employment has not yet mirrored previous cycles, with no significant layoffs or wage stagnation observed, the decrease in net interest income has become a notable burden on consumer spending.