CORPUS CHRISTI, Texas — When Peter Patel walks into his grocery store, QC Meat Market in Corpus Christi, he has a few things on his mind.
Not having enough products due to supply chain issues, paying higher prices for those products, and customers spending less in his business due to inflation.
Patel said his business wasn’t doing as well as last year because of all of these factors, but he didn’t expect an even bigger factor:
The federal interest rate rose 0.5% last month.
“We expected some to slow the economy and the feds have no choice, but we didn’t expect such an uptick,” Patel said.
On Wednesday, the Federal Reserve announced that the federal interest rate would increase by 0.75%.
Patel said he was already struggling to repay his business loan and with rising interest rates he was reconsidering a loan he was going to take out to refurbish his store.
“If interest rates go up, up, then we have to rethink that because then everything else will go up,” he said.
Dr. Jim Lee, an economics professor at Texas A&M-Corpus Christi University, said interest rate hikes aren’t good for companies that have loans like Patel’s.
He said rising rates will also affect retirement savings, general savings, mortgage rates and credit cards.
Lee added that the Fed is raising the interest rate so people stop spending, which will reduce inflation as there is less demand for commodities.
“Short-term pain in exchange for long-term gain,” Lee said.
Lee expects the interest rate to go even higher in the future, which means the economy could slow down.
He said he hoped the economy would not slow down enough to cause a recession.
While a privileged few are affected by loans, others will be affected by taking out credit cards.
Jack Brandon, the lead debt consultant for Debt Redemption, said he’s seen about three times as many people consolidate their credit cards.
He said that because the interest rate has gone up, more people have to rely on credit cards, but they are unable to pay them all back.
“They use their credit cards again to meet their basic needs, and then they end up running out of room as they max out their credit cards,” Brandon said.
He added that people with variable interest rates would be hit the hardest.
While Patel said he only has one credit card, he is already preparing for the future of his business by saving.
“Just watch your costs, try to save unnecessary expenses,” Patel said.