Wednesday, December 15, 2021
The Fed held its key rate at 3.75% to 4% on Oct. 28 in a 10-2 vote, with two officials wanting a hike as inflation stays elevated and mortgage rates sit near 7.4%.
The Federal Reserve held its benchmark interest rate at 3.75% to 4% on Wednesday, October 28. The vote was 10 to 2. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented. Both wanted to raise the rate by a quarter point at this meeting, according to the Fed's official statement. The pause follows a quarter-point hike in September, the Fed's first increase since July 2023, Fox Business reports.
The statement says inflation "remains elevated." It also says uncertainty is high "owing, in part, to geopolitical developments," while the economy is "expanding at a strong pace" and the unemployment rate "has changed little." Energy is doing most of the pushing. September consumer prices rose 3.7% from a year earlier, with gasoline up 34.2%, as fuel markets react to the war with Iran. At his press conference, Chair Kevin Warsh said policy is "starting to work some" and that politics "played no role" in a decision made days before the midterm elections, Yahoo Finance reported.
Borrowing costs are already moving without a new hike. The 10-year Treasury yield rose above 5% on Wednesday, and the average 30-year mortgage rate sits near 7.4%, according to Realtor.com's chief economist. Bond traders put the odds of a December hike at about 85%. The Fed's next meeting is December 9. These figures are as of October 28 and are expected to keep shifting with each new inflation and oil report.
For a prepared household, a rate decision lands first on debt with a rate that floats. Credit card balances, home equity lines and adjustable loans reprice when the Fed moves, so a balance you carry today may cost more by winter. If you carry a variable-rate balance, paying it down now shrinks what a December hike can add. If you are planning a big purchase on credit, the factors to weigh are the rate you can lock today, the price you expect to pay, and how long you would carry the balance. Higher rates cut the other way for savers. A cash buffer in a high-yield savings account earns more while it waits, and understanding the role of cash in a crisis helps you decide how much to keep within reach.
Rate news tends to rattle markets for a day or two. Knowing how fear-based financial markets behave helps you act on a plan instead of a headline. Where it stands now: the rate is unchanged, two officials are pushing for a hike, and the next decision comes December 9. This week, list every balance your household carries and its rate, mark the ones that float, and fold a payoff target into your economic preparedness budget. Be Prepared Not Scared!
