The Federal Reserve has raised interest rates by the biggest margin in nearly 30 years. The Fed’s FOMC raised the federal borrowing rate by 0.75%, the tied-largest move in a single meeting since 1994.
Fed Raises Prime Rate to 5.5%
The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) has raised interest rates for the fourth time in 2022. The FOMC met Wednesday to address spiraling inflation further, with rates rising a further .75% to 5.50%.
The increase of 75 base points – or three-quarters of a percentage point – follows a similar rate increase in June, an increase of 50 points (or .5%) in May, and an increase of 25 base points (or .25%) in March – the first time rates increased since the coronavirus pandemic.
FOMC Bullish, but Economy Continues to Struggle
The FOMC appears bullish on the long-term future of the U.S. economy. Still, the continuing conflict in Ukraine seems to be having severe impacts on supply chains globally.
“Recent indicators of spending and production have softened. Nonetheless, 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 FOMC said in a statement.
“Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.”
The Fed’s FOMC is expected to make additional rate increases this year, with some experts estimating 1.15% in additional rate increases by the end of 2022. Many experts expect the FOMC to raise rates by 3.4% this year, with 2.25% already added through four rate adjustments.
What Can Consumers Do to Help Save Money?
The Prime Rate increase will have many borrowers worried. Consumers with revolving loans, such as credit cards, should plan for APR increases in the coming weeks. Higher interest rates will make it more expensive to carry a balance on credit cards, making now an excellent time to consider a balance transfer or low APR credit card to consolidate existing balances.
Related Article: What Is the Average Credit Card APR?
