US Federal Reserve Bank hike the interest rates again. They increase up to 0.5% points.
Federal reserve increases the interest from 4.25% – 4.5%. It is the highest in 15 years.
They also warn of more hikes in interest rates.
Federal Reserve Chairman Jerome Powell said, “the bank wanted to slow down to see how the economy is responding to the cumulative impact of the hikes, which have increased the cost of mortgages, car and business loans, and credit card debt.”
But he warned that Wednesday’s rise was “still a historically large increase and we still have some way to go.”
Is Inflation Actually Improving?
Federal Reserve has raised its interest rates many times this year.
The latest report of the US showed consumer price raises to 7.1% in over 12 months in November but it is a little bit down from 7.7% in October.
Mr. Powell said “the bank was encouraged by signs that inflation was improving, but that it would take “substantially more evidence” to be confident that it was on a sustained downward path.
“It’s good to see progress but we have a long ways to go to get back to price stability,”.
Federal Reserve raising the borrowing cost in a hope that it’ll cool down the economic activity.
Federal Reserve Interest Rate Hike Impact on Credit Cards and Other Loans
Credit Cards
Federal Reserve interest rate hike is definitely going to impact credit card holders.
They can expect to see rates hike in their next billing cycles.
With the frequency of Federal Reserve rate hikes this year, it will be a drumbeat of higher rates for cardholders every couple of statement cycles,” said Greg McBride, the chief financial analyst at Bankrate.com.
Car Loans
Car Loans are also expected to climb due to the effects of the Fed interest rate hike.
Now buying a car will become a costly deal for Americans.
Car loan interest rates depend on many factors A borrower’s credit history, type of vehicle, loan term, and down payment.
According to Edmunds average interest rate on a new car, loans was 5.7 % in the third quarter.
Student Loans
Interest rate increase impact on student loans will depend on the type of loan you have.
Many current federal student loan borrowers rates are fixed by the government.
But new batches of federal loans are priced each July. Federal undergraduate loans disbursed after 1 July will pay 4.99 percent.
Mortgages
30-year fixed mortgages rate don’t affect with the Fed’s benchmark rate, but instead generally track the yield on 10-year treasury bonds, which are influenced by a variety of factors, including expectations around inflation, the Fed’s action, and how investors react to all of it.