The Federal Reserve released the minutes from its June meeting this week, showing that another 75-basis point rate hike could be on the table at its next Federal Open Market Committee (FOMC) meeting later this month.
The Federal Reserve minutes show what the FOMC members spoke about during their June meeting, revealing that they are prepared for another large rate hike at the July meeting.
“Many participants judged that a significant risk now facing the committee was that elevated inflation could become entrenched if the public began to question the resolve of the committee,” the minutes said. “They recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist.”
In June, the Fed raised rates by 75 basis points, the highest increase since 1994. The increase was the third interest rate hike of 2022 and pushed the federal funds target range from 1.5% to 1.75%.
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Inflation remains at 40-year high
Inflation is currently surging at a 40-year high, and is showing no signs of slowing. The Consumer Price Index (CPI), a measure of inflation, rose 8.6% annually in May, according to the latest report from the Bureau of Labor Statistics (BLS). This comes after inflation had eased slightly in April, falling to 8.3% annually. On a monthly basis, inflation increased 1% from April to May.
At a press conference after the June meeting, Federal Reserve Chair Jerome Powell said another 75 or 50 basis point increase will likely be warranted as inflation continues to rise.
And the Federal Reserve system is likely to continue raising rates after its July meeting due to these inflation expectations, experts project. There could be several rate hikes to come in the year ahead and into 2023.
“The FOMC followed through with the largest rate hike since 1994, and the median committee member expects another 175 basis points of hikes before year-end,” Curt Long, National Association of Federally Insured Credit Unions’ (NAFCU) chief economist and vice president of research, said after the last Fed meeting. “That is a sharp departure from the committee’s forecast three months ago, and the rest of the economic projections bear that out.”
If you are struggling amid today’s inflation, consider refinancing your private student loans – before rates rise further – to reduce your monthly payments. Visit Credible to compare multiple student lenders at once and choose the one with the best interest rate for you.
What this means for your wallet
Interest rates for many credit types will be affected by the Fed’s actions since interest rates follow the direction of the federal funds rate.
As the central bank begins to raise rates, borrowers with credit cards and adjustable rates or other short-term interest rates that change with the market conditions will be affected first. Other interest rates will also be affected including homeowners with adjustable-rate mortgages (ARM).
If you have an ARM, or another form of credit with interest rates that could rise in the coming months, refinancing could help you keep your rate low. Compare interest rates for multiple lenders and get the best rate for you.
Contact Credible to speak to a home loan expert and get all of your questions answered.
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