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(Omaha, NE) -- The Federal Reserve is expected to raise interest rates this afternoon to help slow rising prices. Raising the federal funds rate will affect some other interest rates, but not all, says Creighton University Economist Ernie Goss.
"It will change the prime interest rate, so there are some loans that will go up a quarter-percent, but it won't have an effect on mortgage rates." Goss says.
He tells KFAB Radio News mortgage rates are more affected by long term factors like the yield on federal treasury bonds.
This would be the first quarter-point increase in the fed funds rate in three years, but bankers believe there will be more interest rates increases coming this year.
"They're expecting another 1.0 to 1.25 percent over the course of 2022."
The economic theory is, by raising interest rates, consumers will buy less, and the laws of supply and demand will kick in and help hold down rising prices.
"Is is all about inflation, Goss tells KFAB News. "But, the Fed is caught between a rock and a hard place. Interest rates are rising so they need to raise interest rates, but at the same time, that will slow growth more."
And Goss says, that could lead to stagflation.
"The S-word could become relevant in the next few months as growth approaches zero, then you're talking about (more) rate hikes at the same time as the economy is slowing down."
Economists believe stagflation can lead to higher unemployment and a drop in consumer spending power.