Federal Reserve Raises Interest Rates for First Time Since 2023
The Federal Reserve voted unanimously to raise its benchmark interest rate by 0.25 percentage points to 3.75%-4% on September 16, marking its first increase in over three years amid persistent inflation driven by energy prices.
What Happened
The Federal Reserve raised its benchmark interest rate by 25 basis points to a target range of 3.75%-4%, voting 12-0 on Wednesday. This marks the first interest rate hike since July 2023.
The hike is part of an effort aimed at combating inflation brought on by spiraling oil prices and other factors. Central bank officials are struggling to get inflation back to its 2% target, a mission that has yet to be accomplished in over five years, with persistent price pressures fueled by rising energy costs from the Iran War.
What's Next
Updated projections point to the possibility of another rate increase this year. Four of the 18 officials who submitted forecasts believe rates will need to be a half point higher by year's end.
What This Means for You
The Federal Reserve's rate hike will change what you can earn on new savings products and what you'll pay on new loans and credit card debt. If you're already in a fixed-rate bank savings product like a certificate of deposit, or a fixed-rate loan such as a home equity or auto loan, you won't see any changes—those rates are locked in. If you're planning to take out a mortgage, auto loan, or adjust your savings strategy, expect higher costs going forward as banks adjust their rates in response to the Fed's move. New credit card offers and home equity lines of credit will also reflect the higher interest rate environment.
Sources
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