INDIANAPOLIS (WISH) — The Federal Reserve is raising benchmark interest rates by a quarter of a percentage point to mitigate soaring inflation. This is the first rate hike in three years.

Kyle Anderson, an economist at the Kelley School of Business, says the move is a mixed bag: New borrowers will likely see rates increase, but savers could see better returns.

“Primarily it will affect Hoosiers who might be buying a house, a car that they are borrowing money for,” Anderson says. “Someone who is going to make an offer on a house, going to the bank and getting that financing. Suddenly that monthly mortgage payment is going to be higher, and their rates will likely stay that way for some time now.”

The new benchmark sets the stage for other lenders to hike interest rates to a range of 3.75% to 4%.

Anderson recommends looking for a less expensive house or vehicle to offset higher interest rates and make payments more manageable.

“If you recently bought a house in the last year or two, you probably don’t have to worry about this at all. It’s really about new sales on new houses and existing ones.”

Annual percentage rates on credit cards will also likely rise, though Anderson says credit card companies usually take longer to make those adjustments.

Anderson says the rate hike helps savers because interest rates on savings accounts could go up. However, not all banks pass along the higher rates.

“Bank savings interest rates might go up now. If you have a regular checking or savings account, you might not see higher rates, but if you have a little more savings, you can find a bank offering a better deal. You’re going to find a high interest rate that’s beneficial.”

Anderson says the increase could slow the economy.

“Because businesses will face higher borrowing costs, they may be less likely to make investments, make new hires, and all of that. So we’ll see that play out… a slow economy, slower economic growth and slower job creation.” Anderson says the change is relatively minor. “It’s a small rate increase; it’s not going to send us into a wild recession or contraction or something like that.”

The Federal Reserve will meet Oct. 27-28 to reassess interest rates.

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