How the Fed's steep rate hikes stand to affect your finances

NEW YORK (AP) — Mortgage rates have jumped, home sales have slumped and credit cards and auto loans have gotten pricier. Savings rates are slightly juicier, though.

Yet as the Federal Reserve has rapidly increased interest rates, many economists say they fear that a recession is inevitable in the coming months — and with it, job losses that could cause hardship for households already hurt worst by inflation.

Even before the Federal Reserve acts again Wednesday to sharply raise its key short-term rate — a third straight three-quarter-point hike is likely to be announced – its previous rate hikes are being felt by households across the economy.

The Fed's latest move is expected to raise its benchmark rate to a range of 3% to 3.25%, the highest level in 14 years. Its steady rate increases are making it increasingly costly for consumers and businesses to borrow — for homes, autos and other purchases. And more hikes are almost surely coming. Fed officials are expected to signal Wednesday that their benchmark rate could reach as high as 4.5% by early next year.

Here's what to know:

HOW DOES RAISING INTEREST RATES REDUCE INFLATION?

If one definition of inflation is “too much money chasing too few goods,” then by making it more expensive to borrow money, the Fed hopes to reduce the amount of money in circulation, eventually lowering prices.

WHICH CONSUMERS ARE MOST AFFECTED?

Anyone borrowing money to make a large purchase, such as a home, car, or large appliance, will take a hit, said Scott Hoyt, an analyst with Moody's Analytics.

“The new rate pretty dramatically increases your monthly payments and your cost," he said. "It also affects consumers who have a lot of credit card debt — that will hit right away."

That said, Hoyt noted that household debt payments, as a...