High interest rates hurt the working class while the upper class keeps inflation high
Krugman, New York Times Opinion columnist, and Coy, New York Times Opinion columnist, 7-11-24
[ Paul & Peter, 7/11/24, New York Times, “Is America Getting Interest Rates Wrong?”, https://www.nytimes.com/2024/06/11/opinion/interest-rates.html, accessed 7/14/2024, LR]
Coy: I’d like to get into how high interest rates hurt the poor more than the rich. Most upper-income people own houses. Either they own them free and clear or they refinanced their mortgages at 4 percent or less. Lower-income people who are trying to buy for the first time are looking at 7 percent loans. Credit card rates were up to over 21 percent as of February. That hits people who can’t afford to pay off their cards every month. Four-year auto loans were up to 8.5 percent from under 5 percent two years ago. Etc.
Theory says higher interest rates should hurt stock prices, but that clearly hasn’t been happening. Stocks are ripping. So the people who own stocks are feeling rich and spending freely. That’s keeping the economy strong and keeping inflation above the Fed’s 2 percent target.
The Fed says: Well, inflation is too high, so we’d better keep rates high. But then that hurts borrowers. The blunt tool of high rates is coming down on the heads of the working class.