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How Inflation and Interest Rate Hikes Impact Our Mental Health

By Natasha Tracy  •   October 10, 2022

Everyone knows that high inflation means that everyday items will cost more, and interest rate hikes will make mortgages more expensive too, but have you considered what the effects of these financial forces will be on your mental health? These forces are more linked to your psychological wellbeing than you might think. As it turns out, high inflation and interest rates can lead to anxiety, depression, and other negative mental health effects. In other words, inflation rates and interest rates don’t just affect you financially, they affect you psychologically as well.

What Is High Inflation?

The International Monetary Fund defines inflation as: “the rate of increase in prices over a given period of time.”

Inflation can be measured by looking at the prices for many goods and services over time or only specific ones at a time.

In June, inflation in the United States reached a four-decade high at 9.1 percent, reports the Bureau of Labor Statistics. Food, gasoline, and shelter inflation rates were most pronounced. This means that a tank of gas or a bag of groceries today costs more than it did last month. People feel this pinch as the money they have can buy less, or put another way, is worth less.

And people are definitely feeling money stress right now. According to a recent Stress in America poll from the American Psychological Association, money stress ranked at the highest level since 2015, with the top sources of stress linked to the rise in prices of everyday items such as groceries and energy bills, followed by supply chain issues and global uncertainty. When it comes to money concerns, people report feeling stressed, anxious, and overwhelmed.

Whose Wellbeing Suffers with a High Inflation Rate?

A high inflation rate does not affect everyone equally. Like with so many things, how a high inflation rate affects you comes down to your overall economic wellbeing.

In theory, a person deeply in debt can actually benefit from high inflation as each dollar they have to pay back is effectively worth less. This might be beneficial for those with high wages; however, those in debt often have lower incomes that do not rise with the rate of inflation. This puts them in a worse financial state overall.

Those who have little-to-no disposable income tend to be put in worse financial shape with a high inflation rate. When most (or all) of a person’s income is being put towards necessities like food and gas, generally because they are a low wage-earner, they are hit hardest of all with a high inflation rate. People in this situation may have to choose between necessities like food and medicine when the inflation rate is high. Wealthy people, on the other hand, tend to have a cushion and investments that can help them ride out a storm of inflation.

The result of continuing inflation can create further economic inequality where the rich get richer and the less fortunate become worse off over time – a problem that has been concerning economists for years.

Via Live Science, Lisa Strohschein, a sociologist at the University of Alberta who studies stress, family dynamics and health, including the effects of financial strain, says:

"Growing economic inequality has been a significant and long-term issue. And we now live in a world where the pandemic has made some people more wealthy than they already were, but for people who are at the bottom, they have never been more insecure."

Income Inequality and Unemployment’s Effects on Psychological Wellbeing

It comes as little surprise that income inequality is bad for populations health overall, and this includes population mental health.

In 2018, a study published in the World Psychiatry journal looked at 26 studies on income inequality and found that two-thirds of the studies said that as income inequality increased, so did depression. The researchers in this study were even able to quantify by how much. A statistical reanalysis of 12 of the studies revealed that people in highly inequitable societies were about 1.2 times as likely to experience depression when compared to those in more equitable societies.

Additionally, societies with greater income inequality may also have higher rates of schizophrenia. The study, “Income inequality and schizophrenia: increased schizophrenia incidence in countries with high levels of income inequality,” says this may be because:

“. . . income inequality impacts negatively on social cohesion, eroding social capital, and that chronic stress associated with living in highly disparate societies places individuals at risk of schizophrenia.”

Unemployment also has very negative impacts on a population’s mental health. Also from Live Science, the Holmes-Rahe Life Stress Inventory ranks losing a job as the eighth most stressful life event that can happen to a person. Unemployment is known to create symptoms of:

• Anxiety

• Depression

• Low self-esteem

One 2009 paper found that about 15 percent of employed people experience psychological symptoms whereas 34 percent of unemployed people do. Blue-collar workers are those that are hit the hardest.

Those with severe anxiety or depression should always seek medical help. In some cases, medications may be prescribed by a doctor. For anxiety, those medications include:

• Selective serotonin reuptake inhibitors (SSRIs) like escitalopram (Lexapro) or fluvoxamine (Luvox)

• Serotonin and norepinephrine reuptake inhibitors (SNRIs) like duloxetine (Cymbalta) or venlafaxine (Effexor XR)

• Other types of antidepressants like trazodone (Desyrel) or nortriptyline (Pamelor)

• Benzodiazepines like alprazolam (Xanax) or lorazepam (Ativan)

Occasionally other classes of medications like antipsychotics or anticonvulsants may also be used.

When it comes to depression, the following medications may be prescribed in more severe cases:

• SSRIs like vilazodone (Viibryd) or vortioxetine (Trintellix)

• SNRIs like desvenlafaxine (Pristiq) or levomilnacipran (Fetzima)

• Other types of antidepressants like amitriptyline (Elavil), isocarboxazid (Marplan), or bupropion (Wellbutrin)

Sometimes other medications like stimulants and thyroid products are also useful in those with depression.

How Inflation and High Interest Rates Affect One’s Psychological Health

Inflation makes people’s pay effectively less over time and makes the pay less adequate in providing what people need to survive. For people in low-income households, this starts to create additional anxiety. This anxiety is due to both economic worry and uncertainty.

According to Kara Nassour, via Verywell Mind, a licensed professional counselor with her own private practice, financial stress and high inflation can create:

• Chronic anxiety

• Exhaustion

• Strained relationships

• A sense of instability

• Cynicism

• A lack of trust in the government

Nassour also says financial stress can prevent a person from getting education, housing, or healthcare.

Scott Schieman, a sociologist at the University of Toronto, researches American and Canadian workers, and in January and February, more than half of workers said they felt their job didn't pay them enough to make ends meet.

Via Live Science, Schieman says, "Feeling underpaid and having insufficient income from one's main job is a chronic source of stress that has links to anger and resentment. That dampens positive views about other aspects of the job that might otherwise be seen as good things — like autonomy or challenge."

In response to inflation, many governments will increase interest rates. And while this may make sense from a macroeconomic perspective, it does tend to have deleterious effects on some individual’s psychological health. For example, a 2018 study published in the Journal of Affective Disorders found that people who are in large amounts of debt may struggle psychologically when interest rates rise. This group of people are known to have a higher rate of mental health concerns than others. The study actually quantified this. For those in large amounts of debt, the study found that a 1 percent increase in interest rates can cause a 2.5 percent increase in the risk of experiencing a mental illness.

While economic impacts do account for much of how a high inflation rate affects one’s mental health, they don’t tell the whole story. According to Schieman, "Things just feel worse, there's a sense of uncertainty and a loss of control that goes with it. And there's a sense it could be worse down the road. All of these things dampen our sense of satisfaction and undermine emotional well-being."

And it’s important to remember that while a high interest rate or inflation may be one or two stressors that a person is facing, these stressors come on the heels of a pandemic – a major stressor that has already harmed people’s mental health. People are good at handling one stressor, or maybe two, but when they are compounded, like they are right now, they tend to have a greater negative effect.

Finally, inflation can affect mental health as it prices therapy outside of what most people can afford, or it makes it unaffordable due to people’s need to spend money on basics like housing and food. A recent study from Verywell Mind found that 48 percent of people would be unable to pay for therapy if the rate increased and 38 percent have required help from someone else to pay for their therapy. About one-third of people have reduced the frequency or stopped attending therapy sessions altogether due to finances. All of this is highly unfortunate as the very resource that could help one’s mental health is what becomes out of reach.

Improving Your Mental Health in the Face of High Inflation and Interest Rates

Via CNBC, according to Preston Cherry, a certified financial planner, certified financial therapist and founder of Concurrent Financial Planning in Green Bay, Wisconsin, when faced with difficult financial environments, it’s important to consider what is within your control and what isn’t. He notes: “We can’t control things like inflation, war, market cycles or economic cycles — those things are going to happen. Uncertainty is certain.”

Understanding the above can take some of the money blame and shame that people are feeling and place it where it belongs: on forces outside themselves. Once that is achieved, people can more easily make decisions about what they should do to make it through a difficult time.

Some suggestions for dealing with high interest rates and inflation and other money worries are:

• Make a budget and stick to it to ensure you’re not overspending.

• Make sure your budget accounts for the fact that your needs have gotten more expensive.

• Cut luxury items like travel, vacations, entertainment, and dining out.

• Pay down the highest-rate debt you have (usually credit card debt).

Finally, remember that the economy moves in cycles, and we may have seen peak inflation already. It’s no time to spend recklessly, but there is reason for hope.


1. Bhatt, N. V., MD. (2022, February 1). Anxiety Disorders Medication: Selective Serotonin Reuptake Inhibitors, Serotonin And Norepinephrine Reuptake Inhibitors, Atypical Antidepressants, Tricyclic Antidepressants, Benzodiazepines, Antianxiety Agents, Anticonvulsant, Antihypertensive Agent, Monoamine Oxidase Inhibitor (MAOI), Antipsychotic Agent. Retrieved September 28, 2022, from https://emedicine.medscape.com/article/286227-medication#showall

2. Boyce, C. J., Delaney, L., Ferguson, E., & Wood, A. M. (2018, July). Central bank interest rate decisions, household indebtedness, and psychiatric morbidity and distress: Evidence from the UK. Journal of Affective Disorders, 234, 311–317. https://doi.org/10.1016/j.jad.2018.03.003

3. Burns, J. K., Tomita, A., & Kapadia, A. S. (2013, April 16). Income inequality and schizophrenia: Increased schizophrenia incidence in countries with high levels of income inequality. International Journal of Social Psychiatry, 60(2), 185–196. https://doi.org/10.1177/0020764013481426

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5. Fielding, S. (2022, August 1). High Inflation Rates Impact Almost Every Aspect of Our Lives, Including Mental Health. Verywell Mind. Retrieved September 27, 2022, from https://www.verywellmind.com/how-rising-inflation-is-impacting-mental-health-5546955

6. Halverson, J. L., MD. (2022, August 29). Depression Medication: Antidepressants, SSRIs, Antidepressants, SNRIs, Antidepressants, TCAs, Antidepressants, MAO Inhibitors, Augmenting Agents, Serotonin-Dopamine Activity Modulators, Antidepressants, Other, Stimulants, Thyroid Products, Neurology & Psychiatry, Herbals, NMDA Antagonists. Retrieved September 28, 2022, from https://emedicine.medscape.com/article/286759-medication#showall

7. Pappas, S. (2022, February 21). Inflation could hit your mental health as much as your wallet, psychologists say. livescience.com. Retrieved September 27, 2022, from https://www.livescience.com/inflation-mental-health-impact

8. Reinicke, C. (2022, May 23). Rising inflation has made people feel anxious and overwhelmed. Here are some ways to cope. CNBC. Retrieved September 28, 2022, from https://www.cnbc.com/2022/05/18/rising-inflation-has-made-people-feel-anxious-here-are-ways-to-cope.html


The purpose of the above content is to raise awareness only and does not advocate treatment or diagnosis. This information should not be substituted for your physician's consultation and it should not indicate that use of the drug is safe and suitable for you or your (pet). Seek professional medical advice and treatment if you have any questions or concerns.