SPRINGFIELD, Mo.– The federal interest rate today is at about 1.5 to 1.75 percent. By the end of this year, that could rise to three percent or even four percent.

With the federal reserve’s announcement of another interest hike, the sharpest rise in over 25 years, a difference is shown in the economy today versus what it was like during the pandemic.

“Covid killed the fed. funds rate,” Stephen Evans of Evans Wealth Planning said. “It went to zero. So, it was zero for a long time, and now it’s going up, and the thing that it’s doing, it’s going up fast. Very fast.”

The increase forecasts a federal interest rate between three and four percent before the year is over.

“Fed. funds rate is the rate that banks borrow from the fed. overnight, so that is that rate,” Evans said. “So it’s going to cost banks more to borrow money from the fed. So that means that banks are going to pay more, which means they’re going to pass that cost on to you. Every way that you borrow money will go up.”

Evans said the dramatic hike is a move to slow down inflation rates, but could swing the economy the other way.

“They’re trying to have a soft landing, like land a plane nicely instead of crashing into the ground,” Evans said. “So that’s why they raise this, because they don’t want it to be a hard landing, but it’s such a hard thing to do that I’m willing to bet they’re willing to put us in a recession to calm inflation, but we won’t know until the future.”

One of the biggest concerns with the economy is the housing market. This higher federal interest rate will affect who’s able to purchase homes.

“If you have $150,000 home at 3% interest versus $150,000 home at five and a half percent interest, now suddenly somebody who is in a lower income bracket can’t afford as much house as they could have nine months ago or a year ago,” Traci Stephens with Gershman Mortgage said.

Evans said if some buyers hold off on looking for new homes, the housing market could benefit from it.

“The number of borrowers that are out there in the housing market right now looking to buy a house is kind of going to level,” Stephens said. “Hopefully that will at least slow the price of inflation in homes, if not even maybe dial it back a bit.”