People living in rural areas are already struggling to pay back credit-card loans and purchase big-ticket items like automobiles, experts say.
The Federal Reserve hiked its benchmark rate by 0.75 percentage points on Wednesday in an effort to temper the rising costs of consumer goods and services.
The Fed’s four rate hikes this year could hurt low-income families more than most, said Radha Seshagiri, the public policy and system change director at SaverLife, a nonprofit that helps families with low and moderate incomes to save money. They are already struggling to pay back credit-card loans and purchase big-ticket items like automobiles due to the rising costs, she said.
However, the recent rise in the cost of living has had an even bigger impact on rural America, according to a report by Iowa State University professor Dave Peters, which studied the impact of inflation in small towns. “The biggest inflationary impact on rural households has been the increased cost of transportation, which is essential in rural areas where residents have to drive longer distances to work, school, or to shop for daily needs.” Peters wrote.
“Excessively high inflation tends to undermine consumers’ purchasing power, especially if their wages or other sources of income have not increased,” according to a report by Michael Fisher, an analyst at financial website TradingPedia. “Therefore, to meet rising costs of living, consumers may need to borrow.”
With the cost of borrowing increasing, lower-income Americans and their credit scores could be more vulnerable, Seshagiri said. “It ultimately will limit these folks from eventually buying a home …all of those things that help people invest in their families or go to work,” Seshagiri added.
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