The Federal Reserve has once again decided to keep its target federal funds rate unchanged. This move might significantly impact consumers and their financial well-being.
The Federal Reserve is responsible for managing monetary policy and regulating the financial system for country. It is controlled by the Board of Governors, and run by seven members, or “governors,” who are nominated by the President of the United States and confirmed in their positions by the U.S. Senate. Jerome Powell has been the chairman since 2018.
Despite ongoing concerns about high borrowing costs, the Fed has raised interest rates 11 times in the past 18 months, pushing the key interest rate to a target range of 5.25 percent to 5.5 percent, marking its highest level in over 22 years.
Consumers hoping for immediate relief from these high borrowing costs are likely to be disappointed by the latest decision by the Fed. Experts and central bankers anticipate that interest rates will remain elevated until inflation aligns more closely with the central bank’s 2 percent target rate.
The federal funds rate not only directly influences the interest rates at which banks lend and borrow from one another, it also indirectly affects the borrowing and savings rates for consumers.
“Relief for households isn’t likely to come soon, at least not directly in the form of a cut in the fed funds rate,” Brett House, economics professor at Columbia Business School, told CNBC.
Loans Load
For people looking to take out new loans for major purchases, such as homes or cars, will most likely feel the repercussions of higher rates. And credit card holders carrying a balance, will also feel a hit as credit card rates, linked to the Fed’s benchmark, have already reached all-time highs. Credit card annual percentage rates are averaging over 20 percent. So you might want to start paying down those credit cards.
