Fed Crushes Household Net Interest Income in Break From Past
- Unlike past cycles, debt costs rose more than interest income
- Burden of interest falls hardest on lower-wealth households
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When the Federal Reserve raises interest rates, US households — in aggregate — usually get a boost to interest income that outweighs the extra cost of servicing debt. Not this time.
The annual interest bill that Americans pay on mortgages, credit cards and other debt has climbed by almost $420 billion since the Fed started tightening policy in March 2022, according to the latest numbers from the Bureau of Economic Analysis. The rise in interest income over the same period was only about $280 billion.