Consumer Debt Soars as Wages Increase by 5.5%
- Written by Steel Rose
Americans are racking up debt at record rates. Consumer debt levels for March 2022 climbed by $52.4 billion, an annual increase of 14%, seasonally adjusted, according to Federal Reserve data released Friday. Revolving credit, which includes credit cards, surged by 21.4%. Despite robust wage growth – over the past 12 months, average hourly earnings have gone up by 5.5% – consumers are seeing those gains eroded by the highest inflation in 40 years. The cost of food is up nearly 9% over the last year, and a gallon of gas now averages $4.279 at the pump.
“All of this newfound debt that Americans have is only going to get more and more expensive in the coming months,” said Matt Schulz, chief credit analyst for Lending Tree. The rise in debt levels is likely driven by two factors, Schulz said. First, there is some pent-up spending after lockdown. Then there are other cash-strapped individuals who are turning to credit cards to pay for basic needs that have grown more expensive, he said.
Paying off credit card debt is about to get even more difficult for those who don’t make the minimum monthly payment: The Federal Reserve on Wednesday announced a half-point rate hike as part of a series of actions intended to address rampant inflation. That means interest rates will rise on everything from credit cards to car loans, pressuring household budgets even further. To read more click here.
The Federal Reserve said Wednesday it is raising interest rates by a half-percentage point to get a handle on the worst inflation America has seen in 40 years. It’s the first time in 22 years that the central bank has hiked rates this much. The decision was unanimous, with all 12 members of the policy-setting Federal Open Market Committee agreeing on it. In March, the Fed ramped up its benchmark borrowing rate for the first time since late 2018, increasing it by a quarter-percentage point.
In his post-meeting press conference on Wednesday, Fed Chairman Jerome Powell said that additional half-percentage-point rate hikes will be on the table for the next few meetings. But the bank isn’t looking to go bigger:
“A 75 basis point increase is not something the committee is actively considering,” Powell told reporters. “If inflation comes down we’re not going to stop, we’re just going to go down to 25 basis point increases,” he added. To read more click here.