Last updated on February 28th, 2023
The Federal Reserve has raised the Prime Rate to its highest rate since January 2009. The Fed’s FOMC raised the federal borrowing rate by 0.75% to 7%, the tied-largest move in a single meeting since 1994.
Federal Reserve FOMC Raises Prime Rate to 7%
The US Federal Reserve has made history yet again after raising interest rates by 75 points. The latest increase is the sixth of the year – and the fourth consecutive 75-point increase. This increase raises the Fed’s benchmark lending rate to a new target range of 3.75% to 4% – the highest rate since the start of 2009.
As a result of the latest meeting of the Federal Reserve’s Federal Open Market Committee (FOMC) agreed to raise rates for the sixth time this year – after years of record-low borrowing costs due to the global coronavirus pandemic. The new Prime Rate – The interest rate that commercial banks charge their most creditworthy corporate customers – is 7%.
In its statement accompanying the news, the FOMC said it will “take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
“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. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the statement added.
What Can Consumers Do to Help Save Money?
The Prime Rate increase will have many borrowers worried. Higher interest rates make it more expensive to carry a balance on credit cards, mortgages, auto loans, and other loans. Consumers with revolving loans, such as credit cards, should plan for APR increases in the coming weeks.
One way to tackle higher credit card APR is through a balance transfer credit card with 0% intro APR. Balance transfer cards are a great way to avoid the origination costs of personal loans. They may offer additional bonuses, like cash back, points, or 0% intro APR for up to 18 months on purchases.
Related Article: What Is the Average Credit Card APR?
