This week, the Federal Reserve issued the minutes from its meeting in June, which indicated that the next Federal Open Market Committee (FOMC) meeting might consider another rate increase of 75 basis points.
The FOMC members discussed a second significant rate rise at their meeting in July, according to the Federal Reserve minutes of their June meeting.
The minutes said that several participants believed that a serious danger now confronting the committee was that rising inflation may become entrenched if the public started to doubt the committee’s determination. They acknowledged the prospect that if rising inflation pressures persisted, an even more restricted approach may be necessary.
The Federal Reserve increased interest rates by 75 basis points in June, the most since 1994. The third interest rate rise of 2022, the increase brought the federal fund’s goal range from 1.5 to 1.75 percent.
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Still at a 40-year high, inflation
At a 40-year high, inflation is now soaring and doesn’t appear to be going down. In May, the Consumer Price Index (CPI), a gauge of inflation, increased by 8.6% yearly, according to the Bureau of Labor Statistics most recent data (BLS). This comes after April when inflation decreased marginally to 8.3 percent yearly. Inflation rose by 1% on a monthly basis from April to May.
Jerome Powell, the chairman of the Federal Reserve, said another 75 or 50 basis point hike will probably be required as long as inflation keeps increasing.
Furthermore, analysts predict that the Federal Reserve system will keep rising rates following its meeting in July as a result of these inflation forecasts. Rate increases may occur often in the upcoming year and through 2023.
Curt Long, chief economist and vice president of research for the National Association of Federally Insured Credit Unions (NAFCU), stated after the most recent Fed meeting that “the FOMC followed through with the largest rate hike since 1994” and that “the median committee member expects another 175 basis points of hikes before year-end.” The remaining economic estimates support the statement that “it is a considerable change from the committee’s prognosis from three months ago.”
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How this will affect your money
Since interest rates move in the same direction as the federal funds rate, the Fed’s activities will have an impact on interest rates for many other forms of credit.
Borrowers with credit cards, adjustable rates, or other short-term interest rates that fluctuate with the market will be impacted first if the central bank starts to hike rates. Other interest rates, such as those for homeowners with adjustable-rate mortgages, will also be impacted (ARM).
Refinancing might help you keep your rate low if you have an ARM or another type of credit with interest rates that may increase in the near future. Get the best deal for you by comparing interest rates from several lenders.