Live updates: Fed hikes interest rates again. Will it slow them down now?
- The Fed on Wednesday raised interest rates for the sixth time this year.
- The hike will make it more expensive for consumers and businesses to borrow money.
- The central bank is boosting rates to curb inflation, which hovers near a 40-year high. But the higher rates risk pushing the economy into a recession.
WASHINGTON – The Federal Reserve plowed ahead with a fourth straight historically large interest rate hike Wednesday — an increase of 0.75 percentage point — in an effort to beat back soaring inflation.
But as the Fed’s monthslong campaign increasingly risks a recession next year, the main question now is – Will it dial back the rate hikes in December or wait until inflation shows clear signs of abating?
At a news conference, Fed Chair Jerome Powell said the Fed could slow the pace of hikes as soon as next month.
“That time is coming and it may come as soon as the next meeting or the one after that,” Powell said.
But he added the Fed isn’t close to pausing its rate hike campaign and needs to boost rates a good bit more to reach a level that’s “sufficiently restrictive” to lower inflation to the Fed’s 2% target. The concern, he said, is that inflation could become “entrenched” in the expectations of consumers and businesses and the Fed must move decisively to head off such a dynamic.
“it’s very premature to be thinking about pausing,” Powell said. “We have a ways to go.”
Citing recent high inflation figures, he added that rates could well rise above the 4.5% to 4.75% range that Fed officials previously anticipated.
The inflation numbers “do suggest to me that we may move to a higher level than we thought at the September meeting,” Powell said. “There’s no sense that inflation is coming down.”
In a statement after a two-day meeting, Fed officials said that in weighing future rate increases they’ll consider the large increases they already have approved and the typical lag between the Fed’s actions and their effects on the economy. Wall Street appeared to interpret that as a signal the Fed will soon reduce the pace of hikes, with stock rising sharply, but Powell downplayed that view.
Fed announcement live
Watch Powell’s live news conference below:
ever-changing housing market.
“Nobody saw this coming. We thought maybe a max of 5%, but not a 7% interest rate,” Nadia Evangelou, a senior economist and director of forecasting for the National Association of Realtors told USA TODAY. As a result, Evangelou said the realtors association has readjusted its forecast several times this year.
The current 30-year fixed-rate mortgage on Tuesday is 7.22%, a decrease of 8 basis points from a week ago, according to Bankrate.com. Bankrate said that the existing 15-year fixed-rate mortgage is 6.47%, a 3 basis points increase from last week.
The average on an adjustable-rate mortgage is 5.53%, up 5 basis points from the same time last week. An adjustable-rate mortgage is a home loan with an interest rate that can fluctuate over time.
— Terry Collins
Mortgage interest rate forecast 2022
As a result of the Fed’s hikes, real estate markets have already been impacted by higher rates for several months and it is widely expected to continue well into next year, Ruben Gonzalez, chief economist at Keller Williams, a property tech real estate company told USA TODAY on Wednesday.
“As the Fed continues to combat inflation, the housing market will continue to slow as one of the most interest rate-sensitive industries. Homeowners’ equity levels are high because of the rapid appreciation, and mortgage default rates remain near all-time lows as markets cool,” Gonzalez said. “We’re unlikely to see mortgage rates move down until the second half of next year but more likely not until 2024.”
Robert Dietz, chief economist for the National Association of Home Builders told USA TODAY that he predicts the Feds will ease up on interest rates no later than 2024 which will lead to a rebound in the housing industry.
“The market for 2023 will be weak until then,” Dietz said. “Home prices will remain high and supply will be low.”
—Terry Collins
Follow along for our coverage of today’s crucial interest rate decision:
Most economists don’t believe the U.S. is in a recession, citing slowing but still-vibrant job growth. There’s little doubt, though, that the economy is losing steam as households and businesses curtail spending amid soaring inflation and the Federal Reserve’s aggressive interest rate hikes aimed at tempering the price increases.
— Paul Davidson
how to prepare for a recession.
Try to put aside just enough so you can scrape by on a strictly bare-bones budget for three months in case you lose your job, said Brian Robinson, a financial adviser and partner with SharpePoint.
announced 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 Sergent
immediate effect varies significantly across individual goods and services.
— Elisabeth Buchwald and Paul Davidson
In all but one of the past five Fed rate hikes, the SP 500 closed at least 1% higher. The most recent hike, which occurred in late September, was the exception. Leading up to the decision, the index was higher but fell immediately after the Fed announced the 75-point hike. In the final trading hours, the SP 500 seesawed between positive and negative territory multiple times.
— Jim Sergent
Understanding why prices rise, what causes it and who it hurts most.
What is a recession?:The economic concept explained and what happens during one.
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 one another. Banks pass on these higher rates to consumers by making it more expensive for them to get a mortgage, a loan, pay off credit card debt and more.
On the flip side, Fed rate hikes increase the interest you earn on money in a savings account.
— Orlando Mayorquin
How will stock react to the Fed?:Here’s how the stock market has moved with all 5 of the Fed interest rate increases
I Bond rates:Why I chose I Bonds to protect my sons’ inheritance from 40-year-high inflation