The Federal Reserve just raised interest rates for the first time since 2023, bringing the target range to 3.75%–4%. But what does the rate hike actually mean for Americans?

Chris Krug and PhD economist Orphe Divounguy examine the Fed’s decision and the growing divide between savers and borrowers. Higher-income households with homes and investments may benefit from higher rates, while younger households, renters and borrowers face higher costs for credit cards, auto loans and mortgages.

Divounguy describes it as a “two-speed economy,” with interest-rate-sensitive parts of the economy struggling to keep up while the highest-income households continue to do relatively well.

The rate hike could also affect state and local governments. Higher borrowing costs can make infrastructure and public projects more expensive, potentially putting additional pressure on government budgets and taxpayers.

The discussion also looks ahead to new home sales, builder incentives, inflation expectations and whether rising energy prices are spreading into the broader economy.

Everyday Economics is hosted by Chris Krug and PhD economist Orphe Divounguy and is brought to you by The Center Square Newswire Service.

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