Will the Fed raise rights on the next Fed Meeting June 13th? Find out here!
Consumers will still feel the effects of higher rates and persistent inflation.
Here’s a breakdown of how the Fed impacts your monthly expenses and savings.
The central bank has raised interest rates 10 times since last year — the fastest pace of tightening since the early 1980s — only to see inflation stay well above its 2% target.
“A pause is not going to make things better,” he added.
Although the Fed’s rate-hiking cycle has started to cool inflation, higher prices have caused real wages to decline. That’s squeezed household budgets, pushing more people into debt just when borrowing rates reach record highs.
Even with a pause, “interest rates are the highest they’ve been in years, borrowing costs have gone up dramatically and that isn’t going to change,” said Greg McBride, chief financial analyst at Bankrate.com.
Credit card rates top 20%
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.
For starters, 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 a Bankrate report.
Mortgage rates are near 7%
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 rate for a 30-year, fixed-rate mortgage currently sits at 6.9%, according to Bankrate, up from 5.27% one year ago and only slightly below October’s high of 7.12%.
In the video below, the host discusses the last Fed meeting notes and the thought of raising or pausing another Fed rate hike.
This is important information for both Boston condo buyers and sellers. It also has implications for Beacon Hill and Seaport apartment renters.