- The Fed is set to raise interest rates for the sixth time this year on Wednesday.
- The rise will make it more expensive for consumers and businesses to borrow money.
- The central bank is raising rates to curb inflation, which is approaching a 40-year high. But rising rates risk plunging the economy into a recession.
Federal Reserve set to raise interest rates on Wednesday for the sixth time this year. This increase will have a direct impact on consumers’ wallets, making it even more expensive for them to obtain a mortgage and pay off credit card debt.
The central bank is raising rates to curb inflation, which is approaching a 40-year high. The September Consumer Price Index report showed annual inflation dipping slightly to 8.2% but rising 0.4% on a monthly basis, beating economists’ expectations.
The Fed is facing growing calls from lawmakers as well as the United Nations to stop raising rates, fearing it could trigger a painful recession. But he did not signal that he would hit the pause button soon as he aims to bring inflation closer to his 2% target, even if that leads to job losses.
For now, at least, the labor market remains strong. Job vacancies are plentiful and the unemployment rate is remarkably low. But economists don’t expect that to be the case in 2023, especially if the Fed continues to raise rates at an aggressive pace. If today’s rise comes as expected – 75 basis points – it would be the fourth consecutive rise at this high level.
Follow our coverage of today’s crucial interest rate decision:
What time is the Fed’s rate hike decision?
The Fed’s decision is announced Wednesday at 2 p.m. ET.
— Elisabeth Buchwald
What time is Powell speaking today?
Fed Chairman Jerome Powell’s press conference begins Wednesday at 2:30 p.m. ET. USA TODAY business reporter Paul Davidson will cover the event in person.
— Elisabeth Buchwald
What is the Federal Reserve System?
Before the rate hike, it’s a great time to review what the Federal Reserve system is all about.
We often associate the Fed with Powell and the building in Washington, DC, but the Fed extends far beyond that. There are 12 regional banks located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. Each bank has its own president.
There are 12 people responsible for deciding what to do with interest rates at every Fed meeting. Seven seats are held by the Federal Reserve Board of Governors, which includes Chairman Powell and six other presidential appointees confirmed by the Senate. The President of the New York Fed votes on interest rates at every meeting. The remaining four votes come from a rotating cast of other regional bank leaders.
— Elisabeth Buchwald
What are current mortgage rates?
Current mortgage rates have topped 7% for the first time in more than two decades, leaving some Americans wondering if they should buy a home in this ever-changing housing market.
“Nobody saw that coming. We were thinking maybe a maximum interest rate of 5%, but not 7%,” said Nadia Evangelou, senior economist and forecasting director for the National Association of Realtors at USA. TODAY. As a result, Evangelou said the Association of Realtors has readjusted its forecast several times this year.
The current 30-year fixed rate mortgage on Tuesday is 7.22%, down 8 basis points from a week ago, according to Bankrate.com. Bankrate said the existing 15-year fixed-rate mortgage is 6.47%, up 3 basis points from last week.
The average variable rate mortgage is 5.53%, up 5 basis points from the same period last week. An adjustable rate mortgage is a mortgage whose interest rate can fluctuate over time.
— Terry Collins
Are we in a recession right now?
As two consecutive GDP contractions in the first two quarters of this year hit an informal recession benchmark, the National Bureau of Economic Research is looking at a broader range of economic activity, including employment, retail sales and industrial production, before determining when a downturn begins and ends. The NBER is a nonpartisan, nonprofit organization that frequently publishes economic research. Within the NBER, a team of eight economists is responsible for determining when recessions occur.
Most economists don’t believe the US is in a recession, citing slowing but still buoyant job growth. There is no doubt, however, that the economy is faltering as households and businesses cut back on spending amid runaway inflation and aggressive interest rate hikes from the Federal Reserve aimed at tempering increases. of price.
—Paul Davidson
How to prepare for a recession
That said, it’s never too early to start thinking about how to prepare for a recession.
Try to set aside just enough to be able to get by on a strictly reduced budget for three months in case you lose your job, said Brian Robinson, financial adviser and partner at SharpePoint.
Also consider postponing “nice to have” purchases. For example, if your refrigerator breaks down, get it repaired or buy a new one. But if the hair dryer you’ve owned for five years still does the job, just not as good as a newer one, keep it — and your money.
Be sure to take inventory of all your monthly subscriptions and ask yourself which ones you could go without, then cancel them.
— Elisabeth Buchwald
Federal Reserve Meeting Calendar
The Fed’s last meeting of the year will take place on December 13-14. Then the central bank will meet again on January 31 for its two-day meeting. Here is the meeting schedule for the remainder of 2023:
- March 21-22
- May 2-3
- June 13-14
- July 25-26
- September 19-20
- October 31-November 1
- December 12-13
— Elisabeth Buchwald
I bond interest rate
The Treasury announced on Tuesday that the rate on its inflation-protected I bonds will fall to an annual rate of 6.89% for the next six months. Anyone can invest a minimum of $25 or a maximum of $10,000 each year.
—Jim Sergeant
Federal Funds Rate Today
Ahead of the next Fed rate hike, the fed funds rate is hovering between 3% and 3.75%. A 75 basis point hike would push the range back to between 3.75% and 4%. The federal funds rate is the interest rate that banks charge to lend money to each other.
— Elisabeth Buchwald
How do rising interest rates contribute to inflation?
Rising rates increase borrowing costs for consumers and businesses, which reduces overall demand for products and services, leading suppliers to cut prices or stop raising them. But the immediate effect varies considerably from one good and one service to another.
—Elisabeth Buchwald and Paul Davidson
stock market today
Stocks opened lower ahead of the Fed’s decision. The Dow Jones Industrial Average was down 0.3% while the S&P 500 was down 0.7% and the Nasdaq was down 1.3% as of 12:30 p.m. ET.
— Elisabeth Buchwald
Performance of the S&P 500 over the last five rate hikes
In all but one of the last five Fed rate hikes, the S&P 500 has closed at least 1% higher. The most recent rise, which occurred in late September, was the exception. Prior to the decision, the index was higher but fell immediately after the Fed announced the 75-point hike. Over the past few hours of trading, the S&P 500 has oscillated between positive and negative territory several times.
—Jim Sergeant
History of the Federal Reserve rate hike 2022
Here’s when the Federal Reserve raised its short-term interest rate this year, and the amount by which it raised that rate.
- March 17: 0.25 percentage point
- May 5: 0.50 percentage point
- June 16: 0.75 percentage point
- July 28: 0.75 percentage points
- September 22: 0.75 percentage points
—Paul Davidson
What is Inflation? :Understand why prices are rising, what causes it and who it hurts the most.
What is a recession? :The economic concept explained and what happens during a.
What does it mean when the Federal Reserve raises interest rates?
When the Fed raises interest rates, it becomes more expensive for banks to borrow money from each other. Banks pass these higher rates on to consumers by making it more expensive for them to get a mortgage, loan, pay off credit card debt and more.
On the other hand, Fed rate hikes increase the interest you earn on money in a savings account.
—Orlando Mayorquin
How will stocks react to the Fed? :Here’s how the stock market fared with the Fed’s 5 interest rate hikes
I Bond rates:Why I chose I Bonds to protect my sons’ inheritance from high inflation for 40 years
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