The Federal Reserve is expected to keep interest rates steady on Wednesday, suggesting that a nearly two-year-long string of hikes may end as inflation eases.
If there is no change, the central bank’s key short-term interest rate will remain at 5.25% to 5.5% for the third month in a row.
- The Fed’s decision will be announced at 2:00 PM EST, Wednesday, December 13.
- Fed Chairman Jerome Powell is expected to speak at 2:30 PM ET after the central bank’s final meeting of the year.
- Powell’s comments are likely to give insight into whether the Fed will start cutting interest rates in 2024, reducing borrowing costs for consumers as well as businesses.
When will the Fed meet today?
The Fed will meet on December 12-13, and will announce its interest rate decision at 2:00 PM EST on Wednesday.
Learn more: Best current CD prices
Will credit card interest rates continue to rise during the holiday season?
The Fed’s series of interest rate hikes, aimed at easing the highest inflation rate in four decades, is a major reason behind credit. Card interest rates have reached record highs just in time for the holiday season.
Some retail credit cards now charge more than 33% interest, surpassing the 30% threshold that stores and banks were previously able to exceed but rarely did — until now.
“They can charge that much,” he said. Chi Chi Wu, a senior attorney at the National Center for Nonprofit Consumer Law. “Credit cards can actually charge whatever they want. It’s a little-known fact.”
The domino effect of a record interest rate hike and rising credit card interest rates could put many Americans in financial distress this holiday season.
Although some consumers are stepping back to deal with higher prices, rising debt and shrinking savings, the average shopper She expects to spend $1,652 this year On holiday purchases, according to consulting firm Deloitte, more has been spent than would normally be spent in the past three years.
A lot of purchases will be made using credit cards. In an October CardRates.com poll of 1,036 shoppers, nearly 4 in 10 respondents said they You intend to get out of credit card debt while on vacation in the new year.
Credit card debt was massive in the country $1.08 trillionAt the end of September, setting a record high. And the average interest rate was 21%This is the highest level ever documented by the Federal Reserve.
Today’s key interest rate
The impact of a savings account on rising interest rates
The upside of the Fed’s series of interest rate hikes was just that Consumers were able to earn good interest on their savings for the first time in years. Even when the Fed leaves interest rates unchanged, savers can do well.
Unfortunately, most account holders do not make the most of this potential opportunity.
Nearly one-fifth of Americans with savings accounts don’t know how much interest they’re earning, according to the Quarterly Study the paths to prosperity By Santander Bank USA, part of Santander Bank Global. Among those who knew the interest rate on their accounts, most were earning less than 3%.
But consumers have time to make a change that could enable them to get more out of their savings.
“We are still a long way from (the Federal Reserve) starting to cut interest rates,” said Greg McBride, chief financial analyst at financial services platform Bankrate. “This is great news for savers, who will continue to enjoy returns that beat inflation in the year.” “Higher-yield, federally insured online savings accounts and certificates of deposit. For borrowers, interest rates remaining higher for longer highlights the urgent need to pay down and repay expensive credit card debt and home equity lines.”
Amid inflation, Americans are seeking to raise credit card limits
A series of federal interest rate hikes that began in March 2022 have increased the cost of borrowing for consumers with interest rates on credit cards and other loans rising significantly.
At the same time, inflation has made everyday necessities more expensive, pushing more Americans to rely on credit cards to get by. But lenders have become more reluctant to issue new cards, so in the midst of the holiday season, the number of shoppers is increasing. Experts say they are seeking higher credit limits.
In October, the rate of top-limit requests rose to 17.8% from 11.2% in the same month a year earlier, and from 12.0% in 2019, New York Fed data showed.
For some consumers, the higher limit on the card they already have is their only option.
“After Covid, inflation and interest rates got out of control,” said Brandon Robinson, president and founder of retirement strategies firm JBR Associates. “People have less emergency funds to fix cars or buy gifts.” “What they do is they use more credit card usage — more than 30% or more than 50% of their credit card allowance — and then they can’t get approved for another card because their credit rating is low.”
Inflation forces more Americans to work multiple jobs
Nearly 8.4 million people He had multiple jobs in OctoberThe Ministry of Labor said, a number that represents 5.2% of the workforce, The highest percentage since January 2020.
“Paying for necessities has become a greater challenge, and affording luxuries and discretionary goods has become more difficult, if not impossible, for some, especially those living at the lower ends of the income and wealth spectrum.” Mark HamrickBankrate’s chief economic analyst told USA TODAY in an email.
People may also work overtime to distribute cash if they are laid off from their jobs since job cuts usually peak The beginning of a new year.
The current federal funds rate
The current interest rate is 5.25% to 5.5%. The Federal Reserve is expected to announce on Wednesday that interest rates have been left unchanged, for the third month in a row.
Where is the economy headed?:Is a soft landing on the horizon? What do the federal funds rate and mortgage rates imply?
Fed decision today:Fed expected to hold steady on interest rates but expects only two cuts in 2024: economists
Leaving savings behind:Many Americans are losing their high-interest savings accounts. Don’t be one of them
When will the Fed meet?:What is the 2024 Fed meeting schedule? This is when the Fed will meet again.
Dow jones today
As of 10:55 a.m. EST, the Dow Jones Industrial Average was up 0.07% and the S&P 500 was up 0.20% on Wednesday ahead of the Federal Reserve’s interest rate decision in the afternoon.
Mortgage rates are falling, is it time to buy?
It depends.
First of all, the Fed does not directly set mortgage interest rates, but its actions have an impact. For example, when the central bank was steadily boosting its key interest rate, the yield on 10-year Treasury bonds also rose. Because these bonds are a measure of the interest applied on an average 30-year loan, mortgage rates have risen.
But over the past six weeks, Mortgage rates have fallen, on average 7% for a 30-year fixed mortgage. That’s down from about 7.8% at the end of October, according to data released by Freddie Mac on December 7.
Perhaps this will give some would-be homeowners the confidence to start looking for a home. For the week ending Dec. 1, mortgage applications rose 2.8% from the previous week, according to the Mortgage Bankers Association.
“However, in the big picture, mortgage rates remain very high,” says Danielle Hale, chief economist at Realtor.com. “The typical mortgage rate according to Freddie Mac data is roughly in line with what we saw in August and early to mid-September, which were then 20-year highs.”
Therefore, many potential buyers may still need to sit on the sidelines, waiting for interest rates to fall further, says Sam Khater, chief economist at Freddie Mac. Hill and many other experts believe mortgage rates will fall next year.
Interest rate forecasts 2024
The Fed is expected to cut interest rates next year, although markets and economists disagree on how many cuts will be made.
Futures markets expect there to be four or five interest rate cuts in 2024, each of up to a quarter of a percentage point. They expect the cuts to begin by spring, and eventually bring interest rates down to between 4% and 4.25%.
But core prices, which do not include the volatile costs of food and energy and are a measure the Fed follows closely, rose 0.3% in November, higher than the 0.2% increase the previous month. This may make the Fed more reluctant to cut interest rates in the near future.
Goldman Sachs and Barclays expect there to be only two rate cuts in 2024. Federal Reserve Chairman Jerome Powell has warned in recent public comments that it is “too early” to talk about interest rate cuts.
November inflation report
Inflation fell slightly last month, with a decline Gas prices mitigate the impact of higher rents.
Consumer prices overall rose 3.1% from a year earlier, slightly less than the 3.2% rise in October, according to the Labor Department’s Consumer Price Index. This slow pace is pushing the inflation rate closer to the level it reached in June, which was the lowest in more than two years. On a monthly basis, prices rose slightly by 0.1%.
However, core prices, which ignore irregular food and energy costs and are closely watched by the Fed, rose 0.3% in November after rising 0.2% the previous month. This means that the annual increase in core inflation remained at 4%, although it is the lowest level since September 2021.
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