Federal Reserve officials raised their key benchmark borrowing cost by half a percentage point in December, capping off a turbulent year for monetary policy. Interest rates have risen by 4.25 percentage points in nine months, the fastest since 1980.
The Federal Reserve maintained its anti-inflationary stance by raising its benchmark interest rate to its highest level in 15 years.
Consistently strong inflation may also put the Fed on an aggressive course, with officials likely to support additional rate hikes at subsequent sessions in 2023.
The Federal Open Market Committee agreed to increase the overnight lending rate by half a percentage point, bringing it to a target range of 4.25% to 4.5%. Along with the rise, officials said that they expect rates to remain higher through next year, with no reductions until 2024.
Rapid rate hikes have significantly increased consumer borrowing costs. According to Bankrate data, the average credit card rate reached a record 19.40 percent on December 7, while the average 30-year fixed rate mortgage is nearly twice as expensive as it was at the start of the year.
When planning your budget, realize that prices are going to continue to rise, and interest rates will also continue to increase. The impact on your borrowing power is going to effect your wallet. Each 0.25 percentage-point increase in the federal funds rate is an extra $25 a year in interest on $10,000 in borrowed debt. Additionally, Bankrate reports, “The average credit card rate was 19.4 percent as of Dec. 7, up from around 16 percent in March, when the Fed began its series of rate increases.” Investors and fans are watching the next moves.
Many credit card holders will see their credit card’s APR rise by that 50 basis point amount within the next billing cycle or two.
If you have good credit now is the time to start looking into a balance transfer with 0% interest for 12 months to help pay off your debt faster.
Thinking of buying a car? Think again. One factor car loans usually track the five-year Treasury note, which is influenced by the Fed’s key rate.
For student loans, borrowers who get federal undergraduate loans after July 1 (but before July 1, 2023) will pay 4.99 percent, up from 3.73 percent for loans received the previous year. Borrowers of private student loans, expect to pay more. Fixed- and variable-rate loans are both connected to benchmarks that track the federal funds rate. These increases normally appear within a month.
More rate hikes till 2024 to get inflation down to 2%. Modest economic growth is predicted ahead.
NEW: Fed Chair Powell said there will not be any rate cuts until the Fed is confident inflation is moving toward 2% https://t.co/7GZ0Fp2tN5 pic.twitter.com/bxbjXXku7A
– Bloomberg (@business) December 14, 2022
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