June 24, 2022

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3 crucial financial moves to make now after the Fed’s biggest rate hike since 1994

2 min read

In a matter of months, it’s become more expensive to carry a credit card balance, a car loan or a mortgage as the Federal Reserve’s interest rate hikes have seeped into borrowing costs.

It’s tough medicine that central bankers hope will break the fever of hot inflation — and no one expects the doses to stop any time soon.

Federal Reserve Chairman Jerome Powell and the other members on a key committee announced another increase in the federal funds rate, a touchstone rate all sorts of lenders use to inform their own interest rates.

It started with a 25 basis point increase in March, after rates were near zero to address the pandemic’s early financial shock waves. Then the Fed added another a 50 basis point increase in May. Now comes the single biggest rate hike since 1994.

“Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common,” Powell said in his prepared remarks at the start of Wednesday’s press conference. “From the perspective of today,
either a 50 or 75 basis point increase seems most likely at our next meeting.” But the Fed will take the data as it comes, he added.

Going into Wednesday’s meeting, the big question was whether the Fed would opt for another 50 basis point increase, a 75 basis point climb, or maybe even more.

The chance of 75 basis point increase became the Wall Street scuttle on the heels of inflation data showing consumer prices increasing faster than expected in May.

The Dow Jones Industrial Average,
DJIA,
+1.00%
the S&P 500
SPX,
+1.46%
and the Nasdaq Composite
COMP,
+2.50%
all finished sharply up Wednesday.

On Main Street, these numbers matter for people’s wallets. That’s because they translate into the borrowing costs a person incurs when they use a credit card, buy a car or a home.

Some transactions, like securing a mortgage, aren’t directly influenced by the Fed….



2022-06-15 20:03:00

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