US rates likely to stay higher for longer, squeezing consumers

The Express Tribune reported that US rates look set to stay high for longer, as persistent inflation and a softening job market make the Federal Reserve's next step harder to call. Consumers would therefore keep facing heavy borrowing costs even though economic growth is losing pace. A Reuters poll found 90% of economists expect the Fed to hold its benchmark rate at 3.50% to 3.75% at its September 15 to 16 meeting.

Inflation is still far above the Fed's 2% target, with consumer prices up 3.4% in July from a year earlier and core inflation at 2.5%. Producer prices climbed 4.7% over the same period, while payrolls unexpectedly dropped by 23,000 in July. Economists remain divided, with some arguing that another rate increase may still be necessary.

For households, a higher benchmark rate generally pushes up charges on credit cards, car loans and personal loans, while mortgage costs can also rise. Dearer borrowing also makes home purchases more costly and can leave indebted families with less disposable income. According to CNBC, economic analyst Mark Hamrick said households have not found the inflation relief they wanted and some have increasingly borrowed to cover the shortfall.