Fed’s rate hike will raise credit card interest
Banks tend to raise their prime rate, which is around 3% higher, based on the current federal funds rate.
The Federal Reserve raised the target range for the federal funds rate 0.25% to 1.25%-1.50% in December.
The move was anticipated by economic forecasters. However, the Fed said its stance on monetary policy remains “accomodative”, supporting strong labor market conditions and a sustained return to 2% inflation.
The Fed has already raised its benchmark overnight lending rate three times this year and plans on three additional hikes each in 2018 and 2019 in order to attain a future federal funds target rate of 2.8%.
Banks raise or lower their prime rate based on this benchmark. Generally, the prime rate is about 3% higher than the federal funds rate. Financial products including credit cards, home equity loans, lines of credit, personal loans and payday loans are all subject to the prime rate.
This means the average consumer can expect their credit card interest rates to rise by 0.25%. So, if your card’s annual percentage rate (APR) is currently 17.25%, you can anticipate this will increase to 17.50% shortly.
The effect on 30-year mortgages and other long-term loans, however, will be more subtle and steady. Car buyers may be affected, although a highly competitive market for auto loans is keeping borrowing costs low.
Hurricane-related disruptions and rebuilding efforts – related to Harvey, Irma and Maria – affected economic activity, employment, and inflation in recent months but have not altered the national economic outlook.
“The labor market has continued to strengthen and that economic activity has been rising at a solid rate… Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters,” the Federal Open Market Committee said in its final rate decision for 2017.
The latest survey data reveals American households are anticipating solid future income growth, as well as planning a substantial increase in spending, while remaining less concerned about debt repayments.
The average American would pay $1,200 less to the Internal Revenue Service in 2019 if the government’s new tax reform bill passes both chambers of Congress, according to an independent analysis released this week.
Around a quarter of a million jobs were created throughout the United States in November, with particularly high growth in the education and healthcare industries, as well as professional and business services.
Additionally, the ongoing tradition of halting foreclosure evictions over the holidays will continue again this year thanks to new eviction moratoriums by government-backed associations Fannie Mae and Freddie Mac.
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