Fed announces third consecutive 75-basis point rate hike
The Federal Reserve once again raised interest rates by 75 basis points on Wednesday. This marked the third consecutive 75-basis point increase and the fifth rate hike this year.
The move came as the Fed continues to fight high inflation, which hit 8.3% annually in August. This was a slight improvement from July but still remains near the 40-year high set earlier this year and is much higher than the central bank’s preferred 2% annual average.
The increased federal funds rate also raises interest rates on products such as personal loans, mortgages, student loans and credit cards.
The rate hike brings the federal funds rate to a targeted range of 3% to 3.25%, and the Fed said it anticipates that more rate hikes are on the horizon, as it is “strongly committed to returning inflation to its 2% objective.”
If you want to take advantage of interest rates before they move higher, you could consider taking out a personal loan to pay down high-interest debt at a lower rate. Visit Credible to find your personalized interest rate without affecting your credit score.
While the Federal Reserve maintains its monetary policy and forecasts more rate hikes, it indicated that bringing down inflation could take longer than previously anticipated.
“At 3%, the rate is now above what most FOMC members consider to be the long-term level and should be effective in reducing demand and slowing inflation over time,” Mike Fratantoni, Mortgage Bankers Association (MBA) senior vice president and chief economist, said in a statement.
“The FOMC members’ projections indicate slower growth, slowly decelerating inflation, and a fed funds rate that will likely top out well above 4%,” Fratantoni said. “The surprise for the market might be the median expectation that they could increase rates to 4.4% by the end of this year.”
The Federal Open Market Committee (FOMC) upped its projection for interest rates by the end of the year, showing that bringing down inflation could be a longer process than it originally anticipated. FOMC members increased their projections for year-end interest rates from 3.4% to 4.4%, and expects rates to remain at or above 4% through 2024.
“Focusing on the Fed’s interest rate decision totally misses what’s most important,” Morning Consult Chief Economist John Leer said in a statement. “FOMC members significantly increased their projections for inflation, unemployment and interest rates over the next two years and lowered their GDP growth forecasts. Even the Fed is growing less confident in its ability to achieve a soft landing.”