So Has the Federal Reserve Interest Rate.
WASHINGTON — The Federal Reserve signaled its confidence Wednesday, Sept 25, 2018, in the U.S. economy by raising a key interest rate for a third time this year, forecasting another rate hike before year’s end and predicting that it will continue to tighten credit into 2020 to manage growth and inflation.
The Fed lifted its short-term rate — a benchmark for many consumer and business loans — by a modest quarter point to 2.25 percent for the third time in 2018 and kept its forecast for another hike later this year. It was its eighth hike since late 2015 noticeably increasing monthly payments for borrowers.
The Fed’s rate hike is expected to ripple through the economy, lifting borrowing costs for variable-rate consumer loans such as credit cards, home equity lines of credit, autos and adjustable-rate mortgages. The good news is the strategy is also finally pushing up bank savings and CD rates for Americans who have made do with paltry returns for many years. The robust economy can partly be traced to Trump administration-led tax cuts and spending increases.
HOW FAST RATES WILL RISE
The Fed reiterated that it plans “further gradual increases” in its benchmark rate. It maintained its forecast for a fourth rate hike this year and three more in 2019. Fed officials expect the key rate to rise to 2.4 percent at the end of this year, 3.1 percent at the end of 2019 and 3.4 percent at the end of 2020, according to their median estimate.
“Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low,” the Fed said. Low unemployment is making it tougher for employers to find workers, prodding companies to fatten paychecks.
WHAT IT MEANS
So far, with the economy and labor market strengthening, the Fed is pushing ahead with its rate hike plan and not allowing potential hurdles to throw it off course. “Our economy is strong,” Powell declared at the start of his news conference. “ Growth is running at a healthy clip, unemployment is low. The number of people working is rising steadily, and wages are up. Inflation is low and stable, all of these are very good signs”. Jerome Powell was sworn in as the new chair of the Federal Reserve on Monday.
If you are thinking of buying or selling a home, now is a good time to make a decision. If you wait much longer, a higher interest rate might put you, as a buyer, out of the market because the payment will be too high for your budget. For you as a seller of a home, it will slow the market and thus potentially adversely affect home values.
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The majority of the above article was copied from the 09/27/2019 article In USA Today. To view the entire article, click on https://www.usatoday.com/story/money/2018/09/26/fed-raises-rate/1426946002/