Rising Gas Prices Push Federal Reserve Toward Higher Borrowing Costs

Monthly payments for mortgages, auto loans, and credit cards will rise if the Federal Reserve raises its benchmark interest rate from the current range of 3.5% to 3.75%. Borrowing costs for consumers and businesses would increase as a result. This shift follows a period in late last year when the Fed cut its key rate three times. Minutes from a late January meeting showed several of the 19 officials on the rate-setting committee supported reflecting the possibility of "upward adjustments" to rates. Cleveland Fed President Beth Hammack and Chicago Fed President Austan Goolsbee have both suggested rate hikes could be appropriate if inflation remains persistently above the central bank's 2% target. Economists predict the annual inflation rate will jump from 2.4% in February to 3.1% in March, while Cleveland Fed estimates show it could reach 3.5% in April. Gas prices averaged $4.12 a gallon nationwide Monday, up 80 cents from a month earlier. Hammack noted these energy costs are eating up a bigger share of people's paychecks. If these costs prompt consumers to pull back on spending, economic growth could slow and businesses could conduct layoffs.