Fed plans to continue raising interest rates despite slowing inflation


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American consumers have been grappling with skyrocketing inflation for more than a year. But a few weeks ago, they finally got some good news. The Consumer Price Index (CPI) for October came in at 7.7%, which is quite high, but not as high as readings recorded several months earlier.

In fact, October’s CPI reading was seen by many as a sign that inflation may finally be starting to subside. And that could put an end to the aggressive interest rate policies that the Federal Reserve has adopted this year.

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But maybe not. In a series of speeches during the week ending Nov. 19, Federal Reserve officials made it clear that they were not looking to halt interest rate hikes any time soon. On the contrary, the central bank believes that it still has a lot of work to do in its fight against inflation, and interest rate hikes seem to be the best solution.

Unfortunately, interest rate hikes can hurt consumers. And so, if you’re thinking of borrowing money for the short term, you might want to do it very soon, before it costs you more.

Sign that loan before it’s too late

The Federal Reserve does not directly set rates for consumer borrowing such as mortgages and Personal loan rates. Rather, he monitors the federal funds ratewhich is the rate banks charge each other for short-term borrowing.

But when the Fed raises its benchmark interest rate, it indirectly increases borrowing costs for consumers. And given that the Fed is now doubling its interest rate hikes, now may be the time to move on to applying for a loan – before it gets even more expensive to borrow.

In light of the Fed’s plans, now is also a good time to review any debts you have with variable interest rates attached to them — and, ideally, make plans to reduce those balances. If you owe money on a home equity line of credit (HELOC)for example, the rate of this debt could skyrocket in 2023, so the sooner you are able to pay it off, the better.

The same goes for any credit card the balances you wear. This debt could also become more expensive in 2023.

Also, the less credit card debt you have relative to your total spending limit, the less damage it does to your credit score. And a high credit score is a crucial thing to have in today’s volatile borrowing environment.

When will interest rate hikes end?

Based on this recent message, it’s pretty clear that the Fed intends to keep raising interest rates until it sees a noticeable drop in inflation. We don’t know when that will happen, so it’s best to assume that borrowing will remain expensive for the next quarter or so.

If you need a loan, you may want to apply for it as soon as possible. Or, better yet, you might want to see if there’s a way to avoid getting into more debt right now, whether that’s by reworking your budget, boosting your income with a second job, or postponing purchases or major expenses that you don’t have to incur. take at this time.

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