The Fed raises interest rates for the first time in 2023. We break it down.
The Federal Reserve is raising its benchmark interest rate by a quarter point,
Putting it in the range of 4.50-4.75%.
The decision was widely expected by economists and is a step down from recent increases, since inflation is starting to slow and the Fed has decided it doesn’t need to be as aggressive.
But just because the fed is tapping the brakes, that doesn’t mean it has plans to pause rate increases any time soon.
Today’s announcement will have an impact on the u-s economy and your bank account. First, the federal reserve’s interest rate policy is tied to borrowing rates, and made big waves in the housing market in 2022.
Higher mortgage rates, means higher monthly payments for people buying homes now.
And since the central bank began lifting rates from its pandemic-era low, mortgage applications have seen a steep decline, plunging 40% in the last year.
Second, you may have noticed, you’re earning more money in your savings account. That’s because rising interest rates push up yields for savers, with some high-yield accounts now earning more than 3.5% annually.
And last but not least is the Fed’s ongoing battle against rising inflation.
Chairman Powell reiterating the central bank will do everything in its power to fight rising costs, saying it won’t stop until inflation is subdued.
That’ll be a relief – if and when it works. In the meantime, the Fed’s hikes are rippling their way through the economy and your wallet.