Why the blockbuster January jobs report means your mortgage and credit card payments will get more expensive

• The January jobs report trounced expectations, but it also opens the door for more rate hikes in 2022.
• Treasury yields soared after the report's release as investors bet on the Fed to aggressively raise interest rates.

The January jobs report was hugely positive. Its effects on your debt won't be.

Data published Friday showed the US adding 467,000 nonfarm payrolls last month, beating expectations and signaling the Omicron wave did little to slow the hiring recovery. November and December growth was revised higher, too. The improved hiring pace puts the US on track to return to pre-pandemic job levels by July.

The report offered optimistic news for the recovery, yet it also hinted at fresh economic challenges to come. The Federal Reserve has hinted it will start raising interest rates in March as it looks to rein in its pandemic-era relief and fight inflation.

The central bank had been waiting for significant progress in the labor market's recovery before raising rates. With the Friday report signaling the rebound was unperturbed by record virus infections, the Fed has more leeway to remove its accommodative policy.

And the Fed's push to raise rates in the wake of a strong economy will make interest on all kinds of debt, from mortgages to auto loans to credit cards, more expensive.

"The data today were noisy, but the report was a very strong positive surprise that provided further evidence that the Fed has met its maximum employment mandate," Stephen Juneau, an economist at Bank of America, said Friday.

Once rate hikes arrive, Americans can expect a range of things to get more expensive. A higher benchmark rate will trickle through the economy and raise borrowing costs across the board. Credit card interest will grow faster, mortgages will get more expensive, and student loans will have higher interest rates. The news isn't all bad; interest payments from savings accounts will also get larger.

Wall Street already bet on the jobs report to bring a higher-rate future. Investors dumped Treasury bonds following the print, driving the 10-year Treasury yield to its highest level since December 2019. The 10-year yield rises when investors expect the Fed to raise rates, and Friday's price action gave as clear an indication as any that Wall Street is bracing for a series of rate hikes throughout 2022.

Exactly how quickly and how high the Fed will raise rates is still anyone's guess. The Fed's economic projections from December showed policymakers anticipating three increases in 2022, but data published since has shown inflation rising further.

Major banks generally expect more hikes through the year, but their guesses differ. Where JPMorgan and Goldman Sachs see the Fed raising rates five times before 2023, Bank of America expects rate hikes to arrive at every one of the central bank's seven policy meetings left this year.

Fed Chair Jerome Powell was characteristically vague when speaking of hiking plans in a January 26 press conference. Policymakers are "of a mind" to start hiking rates at the March meeting if conditions are "appropriate," Powell said. The Fed will otherwise remain undecided on rate increases until it sees how inflation and job creation trend, he added.

What's practically certain is that higher rates are on their horizon. And with the labor market's recovery charging through Omicron, the worker shortage, and inflation, signs point to a more aggressive hiking cycle than not.