Fed Pauses Interest Rate Hike at 8.5% for Now

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Last updated on September 20th, 2023

The Federal Reserve’s FOMC has decided to pause rate hikes and keep the Prime Rate at the same level for only the second time in two years. The latest Fed meeting provides a respite for Americans as inflation continues to impact consumer confidence and finances. Here is what you need to know about the latest Federal Reserve FOMC meeting:

Federal Reserve Pauses Interest Rate Hikes (for Now)

The U.S. Federal Reserve met for the fourth time in 2023 and did the unthinkable – they kept interest rates at the same level as the previous meeting, with the Prime Rate currently set at 8.5%. The move by the Federal Reserve’s Federal Open Market Committee (FOMC) ends a prolonged period of rate hikes – the sharpest interest rate hike in 40 years.

The latest from the FOMC story follows ten consecutive rate hikes over the past two years, with a little more stability in recent months. After such a lengthy period of increases, most analysts expected another rate hike of 25 base points, so the decision to keep rates at the same rate is a win many economists (and consumers) hadn’t predicted.

Fed Statement Provides Optimism, Caution

The FOMC noted, “Recent indicators suggest that economic activity has expanded despite rising inflation. Job gains have been robust recently, and the unemployment rate has remained low. Inflation remains elevated.

“The Committee seeks maximum employment and inflation at 2% over the longer run. In support of these goals, the Committee maintained the target range for the federal funds rate at 5% to 5.25%. Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the Committee will consider the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is firmly committed to returning inflation to its 2% objective.”

More Rate Increases Expected, So Plan Ahead

Despite the good news, don’t rule out more Prime Rate increases later this year. Expect another base point increase over the coming meeting as the Fed battles rising inflation. Because of the continued impacts of rising inflation, it is essential you take steps to improve your financial footing. This is especially true as retail and store card debt continues to climb:

Total Retail Card Debt

2019 2020 2021 2022 21-22 Change
$125.2 B $114.9 B $111.6 B $118.9 B +6.5%

Retail credit cards and closed-loop store cards are among the easiest credit cards to get with near-prime credit, but these cards also carry higher default risks. One of the easiest ways to stay on top of your finances is by continuing your financial education and planning your monthly budget. These two activities can keep you on top of your finances by identifying any wasteful spending or outdated processes you may have. Also, having a budget is essential for your finances and daily living. It is the source of more security for emergencies or life. This is especially true with the upcoming holiday season. Travel, groceries, gas, gifts, dining, and so much more needs to be considered, making budgeting an essential practice to start implementing.

Related Article: The Ultimate Guide To Secured Credit Cards

Featured image by Dan SmithRdsmith4, CC BY-SA 2.5
About: Cory
Cory Santos

Cory is BestCards.com's "Jack of all trades" and resident credit expert, covering all facets of the credit card space. Cory holds academic degrees in both the U.S. and U.K. In addition to credit cards, Cory finds that jogging, cats, and memes are essential parts of a balanced day.

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