Fed Rate Hikes Backfire This Time, Costing Households $140B as Lower Earners Hit Harder

This time, Fed interest rate hikes resulted in a sharp decline in household net interest income, unlike past cycles
Higher interest costs for households outpaced the rise in interest income by $140 billion since March 2022
Reasons include more consumer debt at variable rates, banks slow to raise deposit rates, and shift from interest-earning assets to stocks
Wealthiest households earn more interest income, while lower earners face bigger debt burdens
This widens inequality and reduces the economic boost from rate hikes, as payouts go to savers less likely to spend extra, while bills hit households more likely to cut other spending