HONOLULU (KHON2) — The Federal Reserve announced an interest rate hike that has not been seen in decades with the goal to cool down inflation. The increased interest rates will make it more expensive to borrow money on things like car loans, home mortgages and even the interest on credit cards.

Many people are feeling the inflation squeeze, Honolulu resident Claude Harring said many items on his grocery list are costing more.

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Harring said, “you got to budget you got to look, you know, you cannot just throw money away like before. You got to budget and watch where the money goes.”

The Federal Reserve increased the interest rate by three-quarters of a point, and it will likely increase by at least another quarter in July.

A University of Hawaii Economy Professor Steven Bond-Smith said this could be felt in several ways.

“It’s going to cost more money to finance that vehicle purchase. Or if you’re not paying off your credit card each month, then you’re going to face a higher rate of interest each month,” Bond-Smith said. “So that provides a pretty strong incentive for people to spend a little bit less.”

Bond-Smith said by spending less, the demand for goods lowers and it gives time for the supply chain to replenish and bring prices down.

But it could also be a double-edged sword, as Hawaii’s economy is dependent on tourism and visitors spending their money in the state.

Bond-Smith said, “it’s gonna make it more expensive for tourists also to come on vacations to Hawaii.”

Honolulu Resident Coryn Tanaka said she noticed a dip in her stocks.

Tanaka said, “of course, I am concerned, I am not making money I am losing money on my stocks.”

The Chief State Economist Dr. Eugene Tian said 401(k) accounts could see a loss in value but said it is best to think long term.

Tian said, “in the long term it may still have some room to increase to recover.”

Tian said people should think of ways to save, maybe drive less with high gas prices, conserve energy at home and spend on essentials.

Tian said, “I think people should hold off on luxury goods, the thing they purchase for enjoying life and is not for a necessity.”

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Tian said inflation could drop 1% by the end of this year and be cut by half next year.