With Biggest Increase Since 1994, Fed Raises Rates For 4th Time This Year – Indicates Slowing Economy | texasinsider

The 30-year fixed-rate mortgage is now over 6%, up from 3.1% at the same time last year

WASHINGTON, DC (Texas Insider Report) – Following a runaway inflation report released two weeks ago – showing June prices rising at their fastest pace in more than 40 years as inflation hit its highest level since 1982 – the Federal Reserve Bank announced earlier in the day that it had raised interest rates by another three-quarters of a percentage point and would continue its aggressive campaign of interest rate hikes until the end of the month. ‘year. Bank officials also signaled that more rate increases are on the way, saying they “expect the ongoing increases…will be appropriate.”

The Federal Reserve raised its central short-term interest rate by 0.75% for the second consecutive month in an effort to rein in the escalating inflation rate, which exceeded 9% for the 12-month period. ending in June. The June CPI report was worse than expected, showing consumer prices were 9.1% higher than a year earlier.

The interest rate hike – the largest since 1994 – is designed to increase the cost of borrowing across the economy to reverse the rapid rate of inflation increase that began to occur during the Biden presidency.

 

• Between the lines, the wording of the Fed’s rate hike announcement said consumer spending and economic output were slowing, representing the bank’s first and most explicit acknowledgment that the economy is slowing.

In mid-June, central bank leaders said they expected interest rates to rise further in the near future, perhaps as much as another percentage point before the end of the month. the year.

The Fed’s monetary policy tightening, the fastest in decades, also rattled financial markets and increased the risk of the United States falling into recession.

• Real estate loans: The rate on a conventional 30-year fixed rate mortgage is now over 6%. This time last year: 3.1%.
• Credit card debt: The average credit card rate reached 16.7% according to BankRate. Credit card rates, closely tied to Fed measures, are expected to continue to rise, compressing consumers with balances.
• Car loans: Rising interest rates and rising prices had already pushed the average monthly car payment to an all-time high of $656 for new vehicles and $546 for used rides, according to Edmunds.

This is the fourth rate hike this year.. The relevant rate, called the federal funds rate, is now in a range of 2.25-2.5%,

At a news conference announcing the interest rate hike, Federal Reserve Chairman Jerome Powell told reporters that another “abnormally large” rate hike could take place in the next or future bank meetings.

He admitted that the path to a “soft landing” is getting narrower and could still be.

On whether the Fed will continue its steep rate hikes, Powell (left) said:

 

When asked if he agreed with President Biden’s assessment that the economy is not heading into a recession – despite GDP being set to contract for a second straight quarter with Thursday’s economic growth data release – Powell said, “We’re not trying to have a recession, and we don’t think we should.”

Previously, Powell – who was recently sworn in for a second term after Biden reappointed him as president – ​​said the Federal Reserve would do “whatever it takes” to rein in inflation, with the bank signaling that further rate hikes were likely to occur.

Additionally, the Biden administration’s struggles to address supply chain issues have been identified by economists as leading to a shortage of goods and, therefore, inflation.

The continued shortage of semiconductor microchips in electronics, as well as port blockages (i.e. the Port of Los Angeles through which 37% of US imports pass) and, more recently, a supply shortage in formula milk across the country prompted public outcry, leading the Biden White House to attempt to intervene.