Federal Reserve raises rates by a quarter point after three-year pause

The Federal Reserve increased interest rates by 25 basis points on Monday, marking the first hike in more than three years. The central bank acted while inflation remained elevated, ending a long period of inaction.

Jhoanna Astudillo, leader of the Hispanic segment in BOK Financial's consumer banking division, stated that the rate change creates a dual financial environment. Borrowing becomes more expensive, but savers may earn higher yields on their deposits.

Astudillo advised consumers to prioritize paying off debts with the highest interest rates. Many credit cards and lines of credit carry variable rates that adjust upward when benchmark rates rise. This shift can increase the cost of maintaining balances and raise total interest payments.

For those with variable-rate credit cards, she recommended reviewing how minimum monthly payments will change and creating a concrete repayment plan. She also suggested comparing current savings earnings against available alternatives.

"Lo que yo les recomendaría es revisar sus finanzas, mirar qué dinero tienen que pueden poner, ya sea en una cuenta de ahorros que les paga un poco más de interés, o pueden buscar un certificado de depósito, que hay certificados que pueden ser más corto plazo o más largo plazo," Astudillo said. She emphasized keeping an emergency reserve rather than investing all extra funds.

Before taking on new debt for major purchases such as cars or home improvements, Astudillo urged individuals to calculate the total cost and assess their borrowing capacity. Higher rates can reduce the amount of loan approval for homebuyers while increasing monthly payments. Experts recommend scheduling a consultation with a bilingual financial advisor to structure a personalized plan.

The decision impacts the cost of financing long-term expenses. Understanding the total amount to be paid can help prevent spending that exceeds a household's budget.