HOUSTON, Texas (KTRK) -- On Wednesday, a government group is expected to make loans more expensive to lower rising prices, but economists aren't sure it'll have an immediate impact.
IT COULD GET MORE EXPENSIVE TO GET A LOAN
For months, the federal reserve, which oversees interest rates, has hinted it may increase interest rates to help with rising costs. The group is expected to do just that on Wednesday.
"Most people are expecting a quarter of a percent increase, but there's also a possibility it could be slightly higher," explained Jorge Barros, a fellow and public finance at Rice University's Baker Institute for Public Policy.
SEE ALSO: Prices rise across US as inflation grows
This will impact loans you take out, or credit card debt you acquire.
"If you were already concerned about purchasing a car because of the high price, and difficulty financing with APR and interest rates, you're going to experience it even more after (Wednesday)," explained Dietrich Von Biedenfeld, an assistant professor at the University of Houston-Downtown.
The rate change would be immediate, but experts say it could take a few days, or weeks to feel it.
RAISING RATES COULD LOWER PRICES AT THE GROCERY STORE AND EVERYWHERE ELSE
The group may increase interest rates to try and cool spending, which is part of the reason why prices are rising at their highest rates in 40 years.
"In theory, the increased prices will reduce certain demands, and then slow peoples desires and overt extension of credit," Von Biedenfeld explained.
SEE ALSO: Tips for managing your finances during inflation
If the cost of loans for items such as a vehicle, or home goes up, it may reduce demand.
"People will kind of scale back their expenditures," Barro said.
If it works, economists said the government group could raise interest rates again later this year.
IT COULD GET WORSE BEFORE IT GETS BETTER
While raising rates has impacted spending before, experts believe it could be different this time. While prices on goods are higher, unemployment is not, meaning people have money to spend.
"I think we're really heading into some uncharted territory," Barro explained. "We see a lot of things that are unusual all kind of happening at the same time."
Some experts said consumer spending isn't the problem. There are supply chain issues, and government spending is historically high.
SEE ALSO: Another 40-year high: US inflation soars 7.9% over past 12 months, biggest spike since 1982
"The expected result in raising the interest against inflation is to put the brakes on. But in reality, we're just lifting our foot off the accelerator a little bit and slowing some of this inflation," Von Biedenfeld said.
This is why some economists worry it'll get worse before it gets better. People will be stuck with paying higher loans, and prices on everything else won't drop.
EVEN WITH HIGHER RATES, IT MAY TAKE MONTHS BEFORE HIGHER PRICES DROP
If the government group increases loan prices, experts believe you won't see an immediate drop in high prices.
"We're looking at least a year or two before inflation rates settle back down. Whether it's the result of monetary policy or whether it's something that happens on its own," Barro said.
This means, loans could be more expensive, and the prices you pay for items at the grocery store, and gas station could still be high.
SEE ALSO: Even a membership to a wholesale supplier can't help you escape higher prices
"It could be months, but if we continue with some of (the) spending policies and inconsistences at the governmental level, particularly the federal government, this could extend at least till 2023," Von Biedenfeld explained.
A high price some Houstonians said they can't afford, which is why they're hoping raising rates will work.
"It impacts me because I'm a struggling single mother," Houston resident, Priscilla Brown said. "I not only have to take care of (myself), I have to take care of my son. I have to take away from certain other things to pay to put gas in my car."
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Economists fear change in loan costs could make inflation worse
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