'We are only working to survive': Durham mom speaks about rising prices, higher cost of living and possible raise in interest rates
Posted June 14, 2022 3:30 p.m. EDT
Updated June 14, 2022 7:11 p.m. EDT
Durham, N.C. — Many families throughout the Triangle are feeling the effects of rising prices.
WRAL News met some of those families on Tuesday at the Durham County Library, where the county distributed free summer meals to students aged 18 and younger.
Durham resident Princess Rahman took advantage of the library’s free meal for her daughter.
“I never knew they did that, but that is a good service,” Rahman said. “Anything pretty much free or any assistance will make a difference, even if it’s a small difference.”
Rahman is a single mom, who works in the health care field. She said rising prices have been hard for her.
“For the average person, I feel like as of right now, you have to make a minimum of $25 an hour to even survive, and jobs are just not offering that,” Rahman said.
Rahman said she’s even requested a raise at work, but she said other coworkers have too.
“I feel like, at this time, we are working only to survive as far as paying bills, put a roof over ahead, pay utilities,” Rahman said. “Anything outside of that is not possible right now.”
Soaring gas prices in North Carolina – which are getting closer to $5 per gallon – are also a concern for Rahman.
“Even with gas, it’s like, if you don’t have to drive, if you’re not going from work to home, it’s not even worth it,” Rahman said.
Jetplane Coffee permanently closes
Jetplane Coffee at 810 North Magnum St. in Durham permanently closed this week after dealing with one economic hurdle after another throughout the pandemic.
“Jetplane and I have been up against the wall since we started,” owner Daryn Berlin said. “It’s a business that began in COVID.”
It was a tough call emotionally to close the coffee shop for Berlin, who poured his heart and soul into the business.
“It’s hard, I think, for people who want to spend $5 a day on a cappuccino, to do that when they see that they’re going to have to pay $5 a gallon for their gas,” Berlin said. “And, I think, a business like ours was one of the first type of business to lose people over those sorts of things.”
With the rising prices and the labor shortage, Berlin said there was no way to make ends meet. His story is an example of the many pressures facing small businesses.
“I don’t regret anything that I’ve done here,” Berlin said. “Of course, it’s emotional. I love every moment of what I did here.”
Federal Reserve considers raising interest rates
Duke University Practice of Economics professor Connel Fullenkamp discussed how the Federal Reserve is considering raising interest rates. The Fed is expected to take action this week.
“Everything that you pay interest on, the rate is actually based off of the rate on government bonds,” Fullenkamp said. “So, if you pay a mortgage and you read the fine print, the interest rate you pay on a mortgage is actually going to be the interest rate on say the one-year government bond, plus a certain percentage.
“So, when the Fed raises the interest rates on government securities, then every interest rate in the economy moves with it. So, when the Fed raises interest rates by say half a percent, then all the other interest rates go up with it. So, what that’s going to do then is make it more expensive to borrow.”
Fullenkamp said if the Fed raises interest rates, things like shopping with your credit card or buying a new car, will become more expensive. The idea is people will hold off on optional purchases, which will help supply and demand get closer to equilibrium.
“The hope is that then that will take down aggregate demand and then that cools off the inflationary pressures because one of the big causes of inflation is a lot of spending and not enough supply in the economy to provide all the things that people want,” Fullenkamp said.
Investors are nervous because the Federal Reserve could be heading into uncharted territory. A three-quarter point rate increase would certainly show that the Fed is really worried about inflation.
However, a move of that magnitude, although not unprecedented, is rare. The last time the Fed hiked rates by three-quarters of a percentage point was in the Alan Greenspan era: November 1994.
In May, the Fed raised interest rates by a half point. It was an action the Fed hadn’t taken since 2000.
Fullenkamp thinks the Federal Reserve should be “aggressive” about raising interest rates. He believes a recession is “likely,” and he predicts it would happen in early 2023.
“Now, are we going to have a bad recession? I don’t think so,” Fullenkamp said. “I think it’ll be mild by historical standards.”
By Wednesday, the Federal Reserve is expected to unveil whether it plans to raise interest rates again.