The Fed is likely to raise interest rates as inflation persists. What that means for consumers — SkimNews
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- Federal Reserve expected to raise target federal funds rate by 0.25 percentage points on Wednesday — its first hike in more than three years — amid rising energy prices and prolonged tensions with Iran.
- Annual CPI inflation rate reached 3.4% in August, with higher oil and gas prices cited as a significant factor by government data; Fed Chair Kevin Warsh has committed to returning inflation to the 2% target.
- Credit card APRs, already above 20%, will likely rise to record highs once the Fed moves, per Moody's chief economist Mark Zandi; auto loan APRs are expected to rise by about 12 basis points in the months following a 25-basis-point hike, according to WalletHub.
- The 30-year fixed mortgage rate surpassed 7% last week for the first time in over a year, with the 10-year Treasury yield hitting 4.95% — the highest since October 2023.
- Adjustable-rate mortgages and HELOCs are pegged to the prime rate, meaning HELOC borrowers see increases immediately; Fed Chair Kevin Warsh explicitly committed to returning inflation to its 2% target.
- President Donald Trump has pushed to lower the federal funds rate, setting up a potential conflict with the Fed's tightening stance.
- Economic analyst Mark Hamrick called the 'potentially overlooked upside' for savers — deposit rates correlate with the fed funds rate, so savers can capture higher yields as rates rise.
Why it matters: Variable-rate borrowers — credit card holders, new car buyers, and HELOC users — feel this within one to two billing cycles, and HELOC rates adjust immediately; fixed-rate homebuyers already face 7% mortgages. The upside the piece calls 'potentially overlooked': savers capture higher deposit yields as the fed funds rate rises, a window many haven't seen in years.
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