The Federal Reserve is expected to leave interest rates unchanged when it meets on Wednesday as it continues to struggle with a mix of economic signals in an effort to lower inflation.
If the central bank takes no action, the key rate will remain in the range of 5.25% to 5.5%, a 22-year high. This will mark the third time that the benchmark rate has not been hiked since the aggressive line was raised in March 2022 to try to tame inflation.
Fed Chairman Jerome Powell has said another rate hike is likely before the end of the year as consumer spending remains strong and the jobs market continues to improve.
When is the central bank rate decision?
The Fed will announce its interest rate decision on Wednesday, November 1 at 2:00 PM ET.
Learn more: Best current CD prices
If the Fed stops raising rates, will the cost of my credit card debt go down?
“No one should think that credit card APRs are going to stop climbing anytime soon,” said Matt Schulz, chief credit analyst at online lending site LendingTree. “They won’t rise as quickly as they have in the last 18 months, but they will likely rise, at least a little and at least for a while.”
The average APR on a new credit card offer is 24.46%, the highest since LendingTree began tracking it in 2019, and the average APR on a card with a balance is 22.27%, according to central bank data.
Store credit cards are worse, with rates typically as high as 30% and some as high as 35%, Schulz said. Consumers should resist the urge to buy when shopping this holiday, he said.
People with credit card debt should pay down as much debt as possible, transfer balances to a 0% interest card if possible, or call your issuer and ask for a lower rate.
How likely is a recession in 2024?
Economists polled in September said there was a 48% chance the U.S. would experience a recession in the next year, a decline from the 61% odds predicted in May.
Barclays predicts around 375,000 job losses by the middle of next year. But consumer spending remains strong despite high inflation and interest rates, which make credit card use and consumer loans more expensive. That would help stave off recession, says Barclays economist Jonathan Miller.
Credit card interest rates hit record highs
The goal of rate hikes is to make borrowing more expensive for consumers and businesses. In one corner of the economy, there are clear signs of movement. The average retail credit card now charges 28.93% interest, a record high, according to Bankrate.
Can they even do that? Short answer: yes.
In response to the central bank’s actions in 2022 and 2023, card prices have reached historic highs. Credit card analysts see those rates as a red flag as the nation heads into the offering season. Inflation-weary shoppers may be tempted to put big purchases on a new store card, unaware of the interest they’ll face if they carry a balance into the new year.
Savings accounts earn more as central bank interest rates rise
A silver lining followed by a Fed rate hike meant consumers could earn good interest on their savings for the first time in years. Even if the central bank keeps interest rates steady, savers remain the big winners.
Down side? Most account holders are not taking advantage.
One-fifth of Americans who hold savings accounts don’t know how much interest they’ll earn, the Quarterly reports. Pathways to Prosperity Studies Through Santander US, part of global bank Santander. And most of those who know the interest rate earn less than 3%.
But it’s not too late to make the move to allow consumers to get more for their money.
“We’re a long way from (the Fed) cutting interest rates,” said Greg McBride, chief financial analyst at financial services platform Bankrate. Expensive credit card debt and home equity underscores the urgency of paying off taxes.”
Be careful. Not all savings earn the same amount:
- Traditional brick-and-mortar savings accounts return only 0.47%
- Money market mutual funds (MMFs) from brokerage firms typically hold the federal funds rate. Vanguard Federal Money Market Fund (VMFXX), one of the largest MMFs, has a 7-day SEC yield of 5.29% (the 7-day SEC yield is the average return over the previous seven days, assuming the rate remains the same for a year).
- CD rates were relatively stable, with the 5-year CD yield at 3.95%, down from 4.04% on January 1.
- Online rates reflect Treasury yields, with short-term rates higher than long-term rates. For example, the average online 1-year CD yield of 5.18% is 123 bps higher than the average online 5-year CD yield of 3.95%.
Live Updates: Mortgage rates likely to continue rising after Fed decision
The Fed does not directly set mortgage rates, but its actions have increased the yield on the 10-year Treasury note. The 10-year bond yield is used as a guide for setting interest rates on average 30-year loans, and experts say it’s driving higher mortgage rates.
Last week, 30-year fixed mortgage rates rose to 7.79%, up from a historic high of 7.74% set in 1971, according to the National Association of Realtors (NAR), the trade association.
To see how that adds up to a home’s price, take a $400,000 home. A mortgage interest rate of 7.79% means a mortgage payment of $2,301. A year ago, that same $400,000 would have had a 7.08% rate and a monthly payment of $2,146—a savings of $155 a month on utilities or gas, said NAR Deputy Chief Economist Jessica Lautz.
“These mortgage interest rates are pricing in housing affordability for some first-time home buyers, especially with rising home prices,” he said.
Affordable housing has made it cheaper for first-time buyers in some markets to rent instead.
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Inflation is the term for “a general rise in prices,” according to Josh Bivens, research director at the Economic Policy Institute, a left-leaning think tank in Washington, DC.
Everything from food to rent becomes more expensive due to inflation. But it is the overall impact that determines what the inflation rate actually is.
“However, inflation simply means that all goods and services, together, rise in price by some common amount,” Bivens said.
Federal Reserve Inflation target 2%, which means that businesses can raise prices by 2% per year and not cause financial hardship to consumers. Cost-of-living increases offered by employers are expected to achieve that goal, to ensure that consumers can keep up with the rising costs of goods and services.
The Dow Jones Industrial Average rose 0.2% and the S&P 500 gained 0.3% shortly after the open and ahead of the Fed’s rate decision late Wednesday.
Overall According to the Consumer Price Index, prices rose 3.7% in September from a year earlier. On a monthly basis, prices rose 0.4% following a 0.6% gain in August, as steep rents and more expensive services offset declines in used car prices and a slowdown in gas and grocery spending.
Core prices, which exclude food and energy, rose 0.3% in the month, but the annual increase slowed to 4.1% from 4.3% in August, the slowest increase since September 2021.
Fed funds rate
Current key rate is 5.25% to 5.5%
The next Fed meeting is in 2023
Remaining meeting schedule of central bank:
When does The central bank is speaking today
Federal Reserve Chairman Jerome Powell is expected to speak at 2:30 pm on Wednesday.
Will the Fed raise rates in November?
The key rate is expected to be in the range of 5.25% to 5.5%.
“The Fed will not raise rates this week because there is no need to exercise that option yet and markets are not calling for further tightening,” Eric Weisman, chief economist and portfolio manager at MFS Investment Management, said in an investor note. “But until the labor market cools significantly and inflationary pressures continue to be sufficiently contained, the Fed will keep the option of future rate hikes firmly on the table.