Fed Pauses Interest Rate Hike at 8.5% Again

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Last updated on February 20th, 2024

The Federal Reserve’s Federal Open Market Committee (FOMC) has once again decided to pause rate hikes and keep the Prime Rate at the same level for only the fourth 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 Other Second Straight Meeting

The U.S. Federal Reserve’s Federal Open Market Committee met for the final time in 2023 and did what many experts expected – they kept interest rates at the same level as the previous meeting. That means the Prime Rate currently sits at 8.5%. The move by the FOMC ends a prolonged period of rate increases – the sharpest interest rate rise in 40 years.

The latest from the FOMC story follows ten consecutive rate changes 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 for many.

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. The Fed meets again in mid-December, although that meeting is associated with a Summary of Economic Projections. 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 during the upcoming holiday season. Travel, groceries, gas, gifts, dining, and so much more need to be considered, making budgeting an essential practice to start implementing.

Related Article: Slay Your Holiday Expenses with this Step-by-Step Guide to Crafting a Top Credit Card-Friendly Budget

Featured image by Dan SmithRdsmith4, CC BY-SA 2.5

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About: Cory Santos
Cory Santos

Cory is the senior credit card editor at BestCards, specializing in everything credit card-related. He’s worked extensively with credit cards and other personal finance topics, including nearly five years at BestCards. Cory’s extensive knowledge is an essential part of the BestCards experience, helping readers to live their best financial lives with up-to-date insights and comprehensive coverage of all facets of the credit card space, including market trends, rewards guides, credit advice, and comprehensive credit card reviews.

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