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Painful remedy: Fed’s interest rate hikes look to slow workers' wage gains, cool real estate markets

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Higher interest rates are slowing the housing market as the Federal Reserve focuses on stunting workers’ wage gains in the battle against high inflation.

Higher rates make mortgages more expensive and could propel a teetering U.S. economy into a recession after first quarter GDP growth was -1.4%. They also come as apartment and rental home tenants face significant increases in rents as well as persistent inflation across other spending areas such as groceries and gasoline.

Powell

Federal Reserve Chairman Jerome Powell prepares his documents as he arrives present to the Senate Banking, Housing and Urban Affairs Committee, the Monetary Policy Report on Capitol Hill, Wednesday, June 22, 2022, in Washington. (AP Photo/Manuel Balce Ceneta)

Mortgage Rates

A sign indicating a reduced selling price for a house sits atop a realtor’s sign in Jackson, Miss., Wednesday, Sept. 25, 2019. (AP Photo/Rogelio V. Solis)

Federal Reserve Powell

Sen. John Kennedy, R-La., questions Federal Reserve Chairman Jerome Powell during Senate Banking, Housing and Urban Affairs Committee hearing as he Powell presents the Monetary Policy Report to the committee on Capitol Hill, Wednesday, June 22, 2022, in Washington. (AP Photo/Manuel Balce Ceneta)