The Federal Reserve (Fed) will raise its key interest rate again by 0.75 percentage point. That is the announcement that, according to the consensus of the experts, the United States central bank will make this Wednesday at the close of its November meeting.
It would be the fourth consecutive rise of 0.75 percentage point and the sixth rise in the benchmark interest rate since March, when the Fed launched its fiercest effort in decades to rein in inflation. That effort has yet to show convincing signs of success because annual inflation is almost four times the 2% the Fed is aiming for in the long run.
What Fed Chairman Jerome Powell says after the two-day meeting will be important this week. Eyes will be especially on his words on inflation, economic growth and the job market.
The Fed’s main goal right now is to curb inflation without sending the US economy into a recession and losing a lot of jobs. The goal is to achieve what is called a “soft landing” in which the economy slows down but avoids a contraction that could be considered a period of recession.
On inflation, we have not had encouraging news, but we have on the side of economic growth. A report showed last week that the economy resumed its growth path in the third quarter, after two quarters in the red.
“Last week’s data suggests the economy is headed for a ‘soft landing.’ Gross Domestic Product (GDP) posted solid growth in the third quarter, allaying concerns that we are already in a recession,” he wrote. on Twitter Mark Zandi, chief economist at Moody’s Analytics. “And while GDP has made no progress this year despite third quarter growth, it is what is needed to control inflation without a recession,” he added.
How long will the Fed raise rates?
Expert opinions have begun to divide on how much longer the Fed will keep raising its benchmark interest rate.
Some who were consulted by the Reuters agency considered that the Fed will not pause its increases until the rise in the consumer price index is at least half of the annual figure of 8.2% that we saw in the most recent official report. Others, such as a Morgan Stanley bank strategist quoted by the Bloomberg agency, believe that this pause will come soon if indicators such as one that focuses on how much US Treasury bonds are yielding and that we explain in these charts are taken into account.
But keep in mind that once the Fed pauses its string of hikes, it will very likely keep its key interest rate high and far from the near-zero we had during the pandemic. The bank anticipates that its reference rate will end this year at 4.4% and will rise a little more, to 4.6%, next year.
Interest rates and how they affect our personal finances
Whatever happens, we must take into account how high interest rates impact our pocket. If the Fed announces another 0.75 percentage point hike this week, that means its key rate will be between 3.75% and 4%. And that hike will push interest rates on credit cards and home loans even higher.
Credit card debt is among those that pay the highest interest rates. That is why experts recommend paying off the balances that are held in them in full each month and, if it is not possible, then outline a plan to get out of them little by little consistently.