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Interest rates may get higher to fight inflation, economic expert says

ODU Economics Professor Bob McNab says the Federal Reserve is raising interest rates to try to decrease demand and lower inflation as a result.

NORFOLK, Va. — Let's face it. No one really likes to see interest rates continuously rise.

Wednesday, the Federal Reserve sharply raised its key short-term rate by three-quarters of a point for a third straight time, even as its previous rate increases are being felt by households at all income levels.

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The Fed's latest move has raised its benchmark rate to a range of 3% to 3.25%, the highest level in 14 years. Now, more hikes are almost surely coming. 

Norfolk resident Jeanne Bowers said the increase is not a big deal to her, but she did feel the impact recently.

"It's done some damage, with the loss of the stock market, to my retirement accounts," said Bowers.

Others, like Andrew Lee from Virginia Beach, call it a double edge sword, saying, "We will have to budget ourselves more carefully."

Old Dominion University Economics Professor Bob McNab said it's a way to drive down demand to help lower inflation.

He said the average consumer will see changes in the stock market, mortgage rates, auto loans, and even credit card use. 

McNab said there are ways to help alleviate the pain, starting with remaining calm during financial stress.

"When markets go into new territory and they correct, it's usually three to four years before they regain the value they lost. So, if you panic now over the next six months and take all your money out of the stock market, you're actually locking in your losses," McNab explained.

He said another thing to pay attention to is how you pay off your credit card debt.

"Are you carrying a balance? Because now that balance is going to create higher and higher interest," said McNab. "Reducing what you spend, getting out of debt if possible, and watching your pocketbook are all things we can do in the short term to get through this period of economic uncertainty."

McNab said depending on how the Federal Reserve handles interest rate hikes moving forward, the United States could technically enter another recession, but he says only time will tell. 

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