Fed Hike Cracks Down on Car Affordability

The Federal Reserve has raised its baseline interest rate to combat high consumer prices, but this move may further strain car affordability for consumers.

According to the Associated Press, the Fed aims to keep inflation around 2 percent, but since 2021, it has been as high as 7 percent. In August, consumer prices rose 3.4 percent compared to the same month last year, and the increase over July alone was quadruple that of the previous month.

The baseline interest rate increase from 3.75 percent to 4 percent will make borrowing money more expensive, affecting everything from credit card interest rates to auto loans and mortgages.

This means that when banks borrow money from the Federal Reserve, they'll now pay a quarter of a percent more interest on that money than they did before, which may be passed onto consumers in the form of higher loan rates.