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The Federal Reserve raised interest rates again. This is what will be expensive


The reference rate is at its highest level since 2007. Loans, credit cards and financing, mainly for cars, will cost more money.

By Mike Winters -


As expected, the Federal Reserve (Fed) announced another quarter-point interest rate hike on Wednesday, bringing the benchmark rate to its highest level since 2007.

The ninth straight rate hike is intended to dampen inflation by raising the cost of borrowing, slowing the economy and possibly triggering a recession.

At the same time, it will also increase the cost of credit cards and car financing.  

A dealership in Richmond, California promotes the sale of used cars, on February 21, 2023.Bloomberg via Getty Images

With this measure, the US central bank has increased the federal funds rate from almost zero in March 2022 to a range of 4.75% to 5%. 

There was speculation that the Fed would pause these increases due to the bankruptcies of Silicon Valley and Signature Bank that occurred in recent weeks, which have fueled instability in the banking system.

However, Federal Reserve Chairman Jerome Powell has repeatedly said that price stability is the "overriding objective" of the central bank. 

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The Fed stays on course for rate hikes

The annual rate of inflation slowed in February to 6%, but remains above the Fed's preferred rate of 2%. 

Rate hikes are often described as a "blunt instrument" because they affect the entire financial system.

In addition, its effects are difficult to gauge, since a rate hike can take many months to be fully absorbed by the economy.

These measures can make a difference in your pocket due to the increase in interest rates

March 22, 202301:28

Since each hike increases the risk of recession, the Fed has slowed them down somewhat, opting for quarter-point hikes in February and March instead of the three-quarter-point hikes it enacted at the end of 2022. Even though the Fed has slowed its roller, Powell has repeatedly said that inflation remains a top priority.

“Restoring price stability is essential to lay the foundation for maximum employment and stable prices over the long term,” Powell said in his semiannual report to Congress earlier this month.

“Historical precedents advise against a premature easing of monetary policy.

We will stay the course until the job is done," he noted.

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What will become more expensive with the rate hike

Although a quarter point change will only slightly increase the cost of borrowing or debt, the cumulative total of nine consecutive rate hikes has increased the price of credit substantially over time.

Let's see how interest rates have risen since January 2022.

  • Auto Financing

    : Interest rates on five-year auto loans have nearly doubled since January 2022, from 3.86% to 6.48%, according to Bankrate data.

    Adding to this increase, many buyers have been hurt by the rising costs of owning a vehicle.

  • Credit cards

    : The current APR for credit cards is slightly above 20%, after rising steadily from 16% in early 2022. The latest rate hike will likely push the average APR up slightly , but not above 21%, according to Bankrate.

  • Student Loans

    : The interest rate on fixed federal loans has risen from 3.73% to 4.99% in the past year, and is likely to rise again for new loans disbursed after July 1.

  • New or Variable Rate Loans

    : Loan interest rates will go up slightly, though the exact amount will vary by borrower based on their credit score.

    Since early 2022, average interest rates on home equity lines of credit (HELOCs) have gone from about 4% to 7.76% in the past week, according to Bankrate data.

    Similarly, home equity loans have gone from 5.96% to 8% in the past week.

  • Source: telemundo

    All news articles on 2023-03-25

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