The Federal Reserve’s intere🥂st rate hikes were supposed to make consumers curtail their spending—but consumers haven’t gotte🦩n the memo, and economists have identified three major reasons why. 

There’s no doubt it’s harder and more expensive to borrow money these days, thanks to the Federal Reserve’s campaign of interest rate hikes. The fed funds rate—a major driver of borrowing costs on all kinds of loans—has been pushed to its highest since 2001. Those rate hikes were designed to slow the economy, discourage borrowing and spending, and drag down inflation.

Indeed, rates for 30-year fixed mortgages 澳洲幸运5开奖号码历史查询:are above 7%, close to their highest in decades, credit card interest rates are at their highest since at least the 1990s, and bank♎s are raising their standards on who they’ll lend money to.

Yet, consumer spending 澳洲幸运5开奖号码历史查询:continues to surge ahead, 澳洲幸运5开奖号码历史查询:defying expectations, and progress against 澳洲幸运5开奖号码历史查询:inflation has stalled for several 🏅months. Economists have pinpointed several major reasons the Fed’s𒁏 tough medicine is going down easier than experts had expected. 

Fixed-Rate Mortgages Have Shielded Homeowners 

High mortgage rates may be the bane of homebuyers ▨and, more broadly, the entire housing market, but there’s a big category of people who are unfazed by them: homeowners who aren’t planning 🙈on moving.

The vast ma🥂jority of home loans have fixed-r🅰ate mortgages, so they’re completely untouched by interest rate changes. 

“A lot of consumers—those with mortgages fixed for 15 or 30 years—have been protected from the worst of the rate increases,” said Nicholas Brooks, head of economic and investment research at Intermediate Capital Group. “Unless they've been borrowing extremely heavily on their credit cards, and most data would indicate that that hasn't been structurally an issue, the increase in interest rates for the average family has had less of an impact than one might have expected.”

This fact sets the U.S. economy apart from other countries around the world, where people are feeling much more financial pain as central banks have raised interest rates to combat inflation according to research this week by the 澳洲幸运5开奖号码历史查询:International Monetary Fund, the U.N.’s financial arm.

Households Stock🌠piled an Astonishing Amount 💦of Wealth During the Pandemic

Another major reason: Households on average stockpiled a massive amount of wealth during the pandemic, and they’ve been drawing on it to continue their spending habits without borrowing. It wasn’t just stimulus checks: Soaring stocks and home prices 澳洲幸运5开奖号码历史查询:made many people richer.

Experts have made various estimates of how much money people accumulated compared to what they would have saved if the economy had stayed on its pre-pandemic course. In February, economists at the San Francisco Fed estimated this “excess wealth” got as high as $13 trillion in 2021 and is now mostly gone.

Increased wages have also largely helped consumers keep up with inflation, keeping their purchasing poweღr steady.

Government Spending Has Stimulated the Economy

Government spending did not slow down too much once the pandemic faded, as President Joe Biden has signed bills 澳洲幸运5开奖号码历史查询:investing heavily in infrastructure, 澳洲幸运5开奖号码历史查询:green energy projects, and social programs. 

“Government spending, primarily focused on supporting businesses, has kept employment ♏strong and kept wage growth strong,” Brooks said. 

That’s helped keep businesses in hiring mode, with jobs plentiful and pay raises keeping ahead of inflation. That’s all good for household balance sheets and consumer spending, Brooks said.

While that spending has helped the economy, it’s been paid for by spending deficits rather than new revenue, leading some economists—for example, those at the IMF, 澳洲幸运5开奖号码历史查询:in a recent report—to warn that the U.S. national debt is becoming unsustainable.