The Federal Reserve held rates steady. Here’s what that means for you

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The Federal Reserve announced it will leave interest rates unchanged Wednesday, in a move that many believe will conclude the central bank’s rate hike cycle and set the stage for rate cuts in the year ahead.

The Fed has raised interest rates 11 times since March 2022 — the fastest pace of tightening since the early 1980s. The spike in interest rates caused consumer borrowing costs to skyrocket while inflation remained elevated, putting many households under pressure.

Although the central bank indicated it will continue to pursue its 2% inflation target, “the real question at this stage is when they’ll begin cutting,” said Columbia Business School economics professor Brett House.

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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 look back at how the central bank’s rate hike cycle affected everything from mortgage rates and credit cards to auto loans and student debt, and what may happen to borrowing costs next.

Credit card rates jumped to nearly 21% from 16%

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 rose from 16.34% in March 2022 to nearly 21% today — an all-time high.

Between high inflation and record interest rates, consumers will end the year with $100 billion more in credit card debt, according to data from WalletHub. Not only are balances higher, but more cardholders are carrying debt from month to month.

Going forward, APRs aren’t likely to improve much. Credit card rates won’t come down until the Fed starts cutting and even then, they will only ease off extremely high levels, according to Greg McBride, chief financial analyst at Bankrate.

“Credit card debt is high-cost debt in any environment but that’s particularly true now and that’s not going to change,” he said.

Mortgage rates hit 8%, up from 3.2%

Although 15-year and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home lost considerable purchasing power, partly because of inflation and the Fed’s period of policy tightening.

In fact, 2023 was the least affordable homebuying year in at least 11 years, according to a report from real estate company Redfin.

“Mortgage rates rocketed higher from record lows to more than 20-year highs,” McBride said.

After hitting 8% in October, the average rate for a 30-year, fixed-rate mortgage is currently 7.23%, up from 4.4% when the Fed started raising rates in March of 2022 and 3.27% at the end of 2021, according to Bankrate.

A “For Sale” sign outside a house in Edmonton, Alberta, in Canada on…

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