The Federal Reserve has recently raised interest rates by 0.75%.
This is the fourth increase in 2022.
Will this interest increase impact me?
The Fed has been aggressive about raising their rates to combat inflation. The interest rate has been pushed from 0.25 in January to a target range of 2.25 to 2.5%. Historically, the Fed usually raises rated by a quarter-point at a time. However, with inflation being so high, they have made more drastic changes this year.
The Fed’s goal is to get the inflation rate down to 2%. The hope is to reduce inflation without sparking a recession.
The changing rates will likely impact prime rates first. Prime rates are the rates that lenders change on credit card balances. Prime rates are chosen by individual banks, but most banks adjust their rates to reflect the changes made by the Fed, but isn’t required.
Americans with adjustable rate mortgages will also be impacted. This is because this mortgage type is tied to the Secured Overnight Financing Rate (SOFR). In May, the SOFR rose from 0.30 to 0.79 overnight. As of July 26, the SOFR is 1.53.