Interest Rates Just Went Up. Here’s Why Consumer Tech Might Cost Even More

The Federal Reserve on Wednesday raised interest rates for the first time since 2023. For the average US household, that means the cost of borrowing money — whether through a loan, a mortgage or a credit card — is about to become more expensive. But that’s just the first layer of the onion: The cost of everything, from rent and groceries to household devices and electronics, has already been climbing steadily over the last 18 months. 

The Fed’s policy move is intended to cool inflation: One of the central bank’s primary objectives is to promote price stability and keep inflation growth at 2% year over year. 

But even after the Fed carried out a series of aggressive interest rate hikes between 2022 and 2023 to control record-high inflation after the COVID pandemic, prices didn’t return to normal. Inflation is the speed at which prices are rising, not the actual sticker price you pay. So if inflation were to fall from 3.4% (the current rate) to 2%, prices would still be rising, albeit more slowly. 

Getting inflation down won’t actually lower prices, said Kathryn Anne Edwards, an independent economist and policy consultant. The higher price level is already out of the bag. What’s hurting is the cumulative increase in prices over several years, and that won’t be resolved anytime soon, she told CNET by email. 

There’s also policy inflation, i.e., the increase in prices caused by the Trump administration’s tariffs and trade policy, war in Iran, fiscal stimulus and other factors. “Unless inflation can drop quickly now, we are likely in for a long haul of small rate increases,” Edwards said. 

The AI tax is hurting us all 

A big reason gadget prices are rising is the AI boom. Data centers that power AI services are gobbling up memory chips, storage and electricity, which pushes up costs for everyone else. Apple recently hiked prices on its devices (including its new phones), as did Samsung, Amazon and other tech and gaming companies. 

Higher interest rates make that worse. When the Fed raises rates, credit card APRs, store cards and buy-now-pay-later plans tend to go up too, so the monthly payment on a $1,200 laptop or a $600 phone ends up costing more over time. Retailers and device makers also borrow to stock inventory and fund production, so as financing costs rise, they have less room to offer discounts or promotions, keeping sticker prices elevated. 

Senior Economics Writer Jeff Horwich of the Minneapolis Fed wrote in a recent article that AI is “moderately heating up today’s economy,” exerting upward pressure on inflation and interest rates through two main channels. The first is a near-term demand shock amid rising supply chain costs for key AI inputs like electricity, metals and computer components. The other is the “wealth effect,” in which soaring AI-driven stock market gains drive consumer spending among the wealthiest households. 

Horwich’s article also pointed to the counterargument that AI could eventually make things cheaper by raising productivity. But he noted that the Fed’s own economists say those benefits are years away and “not yet meaningfully apparent at a macroeconomic level.”

In the near term, if you’re upgrading a work-from-home setup, buying a back-to-school laptop or financing a holiday gadget, you’re likely to see higher prices and higher interest charges — two headwinds hitting all of us, all at once.