The Federal Reserve May Not Hike Interest Rates This Week. What that Means For You
The Federal Reserve is likely to skip an interest rate hike when it meets this week, experts predict. But consumers may not feel any relief.
The central bank has already raised interest rates 11 times since last year — the fastest pace of tightening since the early 1980s.
Yet recent data is still painting a mixed picture of where the economy stands. Overall growth is holding steady as consumers continue to spend, but the labor market is beginning to loosen from historically tight conditions.
At the same time, inflation has shown some signs of cooling even though it remains well above the Fed’s 2% target.
Even with a break in rate hikes, “the one thing that remains very clear is that the Fed is nowhere close to cutting rates,” said Greg McBride, chief financial analyst at Bankrate.com. “Rates remain really high and will stay there for a while.”
The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.
Here’s a breakdown of how the impact has already been felt:
Most credit cards come with a variable rate, which has a direct connection to the Fed’s benchmark rate.
After the previous rate hikes, the average credit card rate is now more than 20% — an all-time high, while balances are higher and nearly half of credit card holders carry the debt from month to month, according to an earlier Bankrate report.
Although 15-year and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.
The average rates for a 30-year, fixed-rate mortgage “remain anchored north of 7%,” said Sam Khater, Freddie Mac’s chief economist. “The reacceleration of inflation and strength in the economy is keeping mortgage rates elevated.”