When the Federal Reserve raises interest rates, headlines usually focus on Wall Street. But here in Louisiana, especially for working families, the Fed’s decisions hit a lot closer to home—from mortgage payments in Metairie to credit card bills in Baton Rouge.
In this explainer, we break down what the Fed actually does, how it controls the economy, and how its decisions affect Louisiana’s middle class more than most people realize.
What Is the Federal Reserve?
The Federal Reserve, or “The Fed,” is the central bank of the United States. It was created in 1913 to stabilize the financial system and prevent economic disasters like bank runs and depressions.
The Fed’s core powers include:
• Managing inflation and employment through monetary policy
• Regulating and supervising banks
• Providing emergency loans to financial institutions
• Controlling the money supply
But the Fed’s most powerful and controversial tool? Interest rates.
Why Does the Fed Intervene in the Economy?
The Fed has three main goals:
1. Keep inflation low
2. Maximize employment
3. Ensure stable interest rates over time
When prices rise too fast (inflation), the Fed raises interest rates to slow things down.
When the economy stalls and unemployment rises, the Fed lowers rates to encourage borrowing and spending.
It’s a balancing act—and when it leans too far one way, regular people feel it fast.
How Does the Fed Use Interest Rates to Steer the Economy?
The Fed sets something called the federal funds rate, which is the interest rate banks use when lending to each other overnight. But that number affects everything else—credit cards, mortgages, car loans, small business loans, and more.
• When the Fed raises rates, borrowing gets more expensive. People spend less, and inflation cools.
• When the Fed lowers rates, borrowing is cheaper. People spend more, which stimulates the economy.
It’s like using a thermostat to control the temperature of the economy—but it’s never perfect.
What This Means for Louisiana
Louisiana’s economy is built on:
• Working-class families living paycheck to paycheck
• Industries dependent on credit like oil & gas, agriculture, tourism, and shipping
• Small businesses trying to stay afloat
• A middle class already squeezed by low wages and high costs
So when the Fed moves, we feel it.
1. Homeowners and Renters
Rising interest rates = more expensive home loans.
If the Fed hikes rates, mortgage payments climb. For middle-class families in New Orleans or Lake Charles, this means hundreds of dollars more per month—or being locked out of homeownership altogether.
Landlords also pass increased costs onto renters, making affordable housing even harder to find.
Related: Who Really Wins When Developers Come to NOLA?
2. People with Credit Card or Auto Debt
Louisiana has some of the highest credit card debt in the nation. When the Fed raises rates, banks raise their interest rates too. That means:
• Higher minimum payments
• Slower debt payoff
• More families stuck in a cycle of debt
Car payments also jump—especially for used cars, which many working-class Louisianans rely on.
3. Small Business Owners
From diners in Kenner to hair salons in Alexandria, small businesses often use loans to cover expansion, payroll, or seasonal dips.
Higher interest rates = more expensive loans = slower growth or layoffs.
Many owners also suffer from decreased consumer spending as families tighten budgets.
Related: Supporting Small Businesses in New Orleans
4. Job Markets in Tourism, Energy, and Construction
When interest rates rise:
• Tourism slows as travel gets more expensive
• Energy projects pause due to tighter financing
• Construction costs jump, killing jobs
This disproportionately impacts workers in parishes like Terrebonne, Plaquemines, and Orleans, where these industries drive local economies.
5. Renters and Low-Income Families
Many landlords finance their buildings with adjustable-rate loans. When rates go up, so do rent hikes. Combine that with inflation and stagnant wages, and the squeeze on Louisiana renters becomes unbearable.
Related: Is New Orleans Actually Sinking? The Truth About Climate, Infrastructure, and Housing
Is the Fed Helping or Hurting?
It’s not black and white.
• If inflation is out of control, raising rates helps cool prices—which helps the middle class in the long run.
• But if rates are raised too far, too fast, jobs are lost, loans become unaffordable, and growth stalls.
In Louisiana—where the cost of living is rising but wages haven’t kept pace—the pain of high interest rates is felt faster and deeper.
When the Fed Moves, Louisiana Feels It
For most people, the Federal Reserve is invisible—until rent goes up, loans dry up, or jobs disappear.
The Fed may not be headquartered in New Orleans, but its policies shape the daily financial reality of Louisiana’s middle class.
Whether you’re a homeowner, renter, business owner, or worker, the next interest rate decision is more than just a headline. It’s the difference between stability and struggle.
