Feeling the pain at the pump? Paying $4.24 a gallon for gas is the norm today, AAA data shows, with some areas of the country reaching nearly $6. For all of us, the fastest climb in inflation of the last four decades has become very real indeed.

That’s why this week we’re taking an updated look at inflation and the economy, following in the footsteps of our previous economic perspectives, inflation trendwatch and role of the Federal Reserve. And like before, the U.S. is facing a slew of economic headwinds — including the ongoing impacts of the pandemic plus the newer concern of the continuing crisis in Ukraine.

As we noted in our last blog in the series, the Federal Reserve kept its widely anticipated promise this month — announcing its first interest-rate hike since 2018 in an attempt to tamp down record-high U.S. inflation, which reached 7.9% in February.

How will you notice the impact of the quarter-point move? Here are some key effects to know.

What does the Fed’s interest-rate hike mean for me?

The Fed’s main tool for managing the economy is changing the federal funds rate. This ongoing tinkering can affect consumer borrowing costs and savings rates but can also shape things like businesses’ decisions on hiring or expansion. Here are a few places where we’ll feel the effects of the Fed actions first:

Mortgage rates. While home-loan costs had been rising ahead of the Fed’s announcement, they tend to rise in tandem. For the week ending March 24, for example, the 30-year, fixed-rate mortgage as tracked by Freddie Mac increased by more than a quarter of a percent to 4.42% — as mortgage rates across all loan types continue to increase. Last year at this time, that rate averaged 3.17%.

Credit cards and car loans. If the Fed continues to raise rates, interest rates on consumer borrowing like credit card balances and car loans will also head up.

How should I react to interest-rate rises?

Review types of debt you hold. Adjustable-rate debt, such as credit card balances or auto loans, will get pricier. While the Fed’s increases won’t immediately boost the interest you pay on loans, they will influence it indirectly. So, reducing debt levels — particularly the highest-interest kind — could be meaningful as the cost of borrowing goes up.

What’s more, if you have loans with variable interest rates, refinancing to lock in a fixed rate could make sense — depending on your personal situation and financial goals — to secure a rate that won’t rise further as interest rates continue to climb with Fed action.

Get ready to earn more on savings. Another effect of interest-rate hikes is higher yields on savings vehicles like high-yield savings accounts and share certificates. That positive trend up means your deposits will earn more.

Those better rates may take a while to kick in, however. That’s because increases in savings rates tend to lag rises in the federal funds rate. The delayed reaction may take some weeks – or months – to take hold.

What’s likely to happen next?

With uncertainty still the name of the game for so many facets of today’s economy and world conflict, coming up with an accurate crystal-ball view will be challenging for some time.

However, the Fed clearly set the stage for more rate increases, signaling at its March meeting the potential to raise rates another six times this year.

What’s the outcome to watch in a rising-rate environment?
The Fed is poised to make borrowing more expensive for businesses and consumers by hiking rates, encouraging them to tap the brakes on big financial decisions. That, in turn, may prevent the economy from overheating — and hopefully, rein in the breakneck pace of inflation we’ve all been experiencing.