The Federal Reserve hiked rates another 0.75% — what the Fed's 'tough love' message means for you
The Federal Reserve hiked rates another 0.75% — what the Fed's 'tough love' message means for you
Abstract
More from Personal Finance:5 ways the Fed's interest rate hike may affect youHow persistent high inflation may affect your tax bracketThese steps can help you tackle stressful credit card debt The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. "Credit card rates are the highest since 1996, mortgage rates are the highest since 2008, and auto loans are the highest since 2012." On the flip side, higher interest rates also mean savers will earn more money on their deposits and, already, "High-yield savings accounts and certificates of deposit are at levels last seen in 2009," McBride noted. As the federal funds rate rises, the prime rate does and your credit card rate follows suit within one or two billing cycles. "You won't get the 0% rate that you might find with a credit card, but a personal loan can be a good option for refinancing and consolidating loans as rates continue to climb." Mortgage rates are already higher. Even though auto loans are fixed, payments are getting bigger because the price for all cars is rising along with the interest rates on new loans, so if you are planning to buy a car, you'll shell out more in the months ahead. The Fed's latest move could push up the average interest rate on a new car loan past 6%, although consumers with higher credit scores may be able to secure better loan terms. If you have a private loan, those loans may be fixed or have a variable rate tied to the Libor, prime or T-bill rates - which means that as the Fed raises rates, borrowers will likely pay more in interest, although how much more will vary by the benchmark. While the Fed has no direct influence on deposit rates, they tend to be correlated to changes in the target federal funds rate, and the savings account rates at some of the largest retail banks, which have been near rock bottom during most of the Covid pandemic, are currently up to 0.13%, on average.