Eyeing on the US Federal Reserve’s move, the UAE Central Bank has raised the interest rate by 50 basis points to 2.25 per cent effective from 05 May 2022. Moreover, the twelve major central banks of developed markets had raised their interest rates in 2021 and even initiated the same practice this year to control inflation which surged their highs in United States and other major economies of the world.
How will the interest rate impact the consumers?
The interest rate hike will be calculated on equated monthly instalments on home, vehicle and loans. Furthermore, the consumers will have to pay higher EMI’s as higher rates will make it more expensive to buy a home or a car, or even carry a credit balance.
However, credit card holders, with a fine credit history, will pay 18% interest rate (on average) annually and it will go up with every hike in interest rates.
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Will the consumers have to pay more?
Consumers will definitely feel the increase in prices and interest rates soon. Credit card users will eventually have to pay higher rates on any revolving debt which will reflect in their monthly statements within the monthly statement cycles.
How many rate hikes are likely to take place?
US has indicated that it has planned to raise rates several times this year. Started in March, it is likely that they will increase their rates multiplied by in 2022 in order to reach its 1.75% point target this year.
How will it benefit the consumers?
The increase in interest rate will indirectly benefit the consumers as the banks will gradually increase their profit rates on saving accounts and certificates of deposit.