The Federal Reserve has raised interest rates for the first time this year. The latest rate hike means higher borrowing costs, so consumers and businesses can expect to pay more for car loans, mortgages, and credit card balances.
FOMC Raises Federal Funds Rate by 25 Points
The Federal Reserve’s Federal Open Market Committee (FOMC) met Wednesday and raised interest rates for the first time in 2023. The FOMC agreed to raise the target borrowing rate by 25 base points – or a quarter-percentage point – to try and control rampant inflation. This is the sixth Prime Rate increase since January of last year.
Wednesday’s 25 base points rate hike follows news that suggests inflation may be slowing down as the global economy slowly recovers from the pandemic and war in Ukraine. The current Prime Rate, based on the federal funds rate set by the Federal Reserve, currently sits at 7.75%. That increases the FOMC’s target range of 4.5% to 4.75%, its highest rate since late 2007.
Inflation Continues to Hit Finances Hard
News of the rate hike will hit consumers hard. Americans are struggling with soaring grocery store costs, despite lowering fuel prices in recent months. Those hardships continue thanks to the war in Europe and continued COVID outbreaks in China.
“Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low,” the FOMC said in a statement. “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.
“Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events contribute to upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.”
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