- ORIGINAL NEWS
The Federal Reserve may not cut interest rates just yet. Here’s what that means for your money
- SUMMARY
The Federal Reserve, the central bank of the United States, is responsible for setting interest rates, which have significant implications for consumer borrowing.
Despite ongoing discussions about potential rate cuts in the future, the Fed is expected to maintain current interest rates at the end of its meeting this week.
This means that consumers won’t experience any relief from high borrowing costs, including credit card debt, mortgages, and auto loans, for the time being.
Federal Reserve Chair Jerome Powell has emphasized the importance of not easing rates too quickly, as doing so could undermine efforts to control inflation and potentially result in the need for higher rates in the long run.
For variable-rate credit cards, which are influenced by the Fed’s benchmark rate, balances are rising, and more cardholders are carrying debt month-to-month compared to last year.
Once the Fed does start cutting rates, credit card rates will begin to decline, but these reductions will be gradual and unlikely to reach pre-hike levels.
Both fixed and variable-rate mortgages have been affected by the Fed’s rate increases and remain elevated.
Adjustable-rate mortgages and home equity lines of credit, tied to the prime rate, continue to carry high interest rates.
Auto loans, although fixed, have become less affordable due to rising car prices and increased interest rates.
Federal student loan rates are typically fixed, but new direct federal student loans now carry higher interest rates.
Variable-rate private student loans are also incurring higher interest charges.
Deposit rates, though not directly influenced by the Fed, tend to correlate with changes in the target federal funds rate.
As a result, top-yielding online savings accounts are paying higher rates, while long-term certificates of deposit (CDs) offer an opportunity to secure attractive interest rates during this period of high rates.
- NEWS SENTIMENT CHECK
- Overall sentiment:
negative
Positive
“Federal student loan rates are also fixed, so most borrowers aren’t immediately affected by the Fed’s moves.”
“As a result, top-yielding online savings account rates have made significant moves and are now paying more than 5% — above the rate of inflation, which is a rare win for anyone building up an emergency savings account, McBride said.”
Negative
“With the combination of sustained inflation and higher interest rates, “many consumers are experiencing higher levels of economic stress compared to one year ago,” said Silvio Tavares, CEO of credit scoring company VantageScore.”
“Fifteen- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy. But anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.”
“Adjustable-rate mortgages, or ARMs, and home equity lines of credit, or HELOCs, are pegged to the prime rate, and those rates remain high.”
“The average rate on a five-year new car loan is now more than 7%, up from 4% when the Fed started raising rates, according to Edmunds.”