{"id":1654295,"date":"2022-09-23T06:07:49","date_gmt":"2022-09-23T10:07:49","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1654295"},"modified":"2022-09-23T06:08:23","modified_gmt":"2022-09-23T10:08:23","slug":"what-the-feds-jumbo-rate-hike-means-for-your-budget","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/what-the-feds-jumbo-rate-hike-means-for-your-budget\/","title":{"rendered":"What the Fed\u2019s Jumbo Rate Hike Means for Your Budget"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">20<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fwhat-the-feds-jumbo-rate-hike-means-for-your-budget%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1654295&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>The <a href=\"https:\/\/www.theepochtimes.com\/t-federal-reserve\">Federal Reserve<\/a> raised <a href=\"https:\/\/www.theepochtimes.com\/t-interest-rates\">interest rates<\/a> by 75 basis points during its September policy meeting. After four previous increases, the benchmark fed funds rate now stands in the 3 percent\u20133.25 target range.\u00a0Fed officials signaled that further big increases are likely at the two remaining meetings this year.<\/p>\n<p>While the Fed\u2019s decisions have consequences for the broader financial markets, they might also have vast implications for household budgets across the country, whether it\u2019s credit cards or savings accounts.<\/p>\n<h2>Credit Cards and Personal <a href=\"https:\/\/www.theepochtimes.com\/t-loans\">Loans<\/a><\/h2>\n<p>The Fed directly influences the prime rate, which is the base rate of how other interest rates are created, whether it\u2019s for a personal loan or a car loan.<\/p>\n<p>Credit card businesses will charge cardholders a variable interest rate that\u2019s based on the prime rate. Because the U.S. central bank\u2019s decisions affect short-term rates, this can significantly impact what Americans pay on their credit cards. Today, the average credit card annual percentage rate (APR) is <a href=\"https:\/\/www.bankrate.com\/finance\/credit-cards\/average-credit-card-apr\/\">18.10 percent<\/a>, up from 17.13 percent in the middle of July, according to Bankrate.<\/p>\n<p>A recent analysis from personal finance website WalletHub <a href=\"https:\/\/wallethub.com\/edu\/sa\/fed-rate-hike-survey\/48053\" target=\"_blank\" rel=\"noopener\">estimates<\/a> that the rate increase would cost consumers an extra $5.3 billion in credit card debt over the next 12 months. That\u2019s in addition to the $15.3 billion increase Americans have already incurred this year as a result of the Fed\u2019s previous rate boosts.<\/p>\n<figure id=\"attachment_4480749\" class=\"wp-caption alignnone\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2022\/05\/20\/GettyImages-87874564-1200x728.jpg\"><figcaption class=\"wp-caption-text\"><noscript><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-4480749\" src=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2022\/05\/20\/GettyImages-87874564-600x364.jpg\" alt=\"Epoch Times Photo\" width=\"600\" height=\"364\" \/><\/noscript><\/figcaption><\/a> Alain Filiz shows off some of his credit cards as he pays for items at Lorenzo\u2019s Italian Market in Miami, Fla., on May 20, 2009. (Joe Raedle\/Getty Images)<\/figure>\n<p>\u201cCredit card debt is easy to get into and hard to get out of,\u201d Ted Rossman, a senior industry analyst for CreditCards.com, said in a <a href=\"https:\/\/www.creditcards.com\/statistics\/credit-card-debt-poll\/\">report<\/a>. \u201cHigh inflation and rising interest rates are making it even harder to break free.\u201d<\/p>\n<p>Home equity lines of credit (HELOCs) also are greatly influenced by Fed moves, since those credit products are generally tied to the prime rate. The interest rate attached to auto loans is also typically connected to the prime rate.<\/p>\n<h2>Mortgages<\/h2>\n<p>Mortgage rates are structured a bit differently. For the most part, they are connected to the 10-year Treasury yield.\u00a0However, the Fed\u2019s decision has an indirect effect on mortgage rates. The mortgage market may have already factored in the anticipated increase in interest rates. Since the beginning of the year, mortgage rates have more than doubled, topping 6 percent, to the highest level since the 2008 housing crash.<\/p>\n<p>If the Fed indicates more rate hikes, mortgage rates could rise further.<\/p>\n<p>While investors are betting that the Fed will start cutting interest rates early next year to spur economic growth, public policymakers insist that rates will remain high for at least the next 15 months. That means that it will become more expensive to access credit or cost more to service current debt levels.<\/p>\n<p>In addition, according to the Federal Reserve Bank of New York\u2019s (FRBNY) recent <a href=\"https:\/\/www.newyorkfed.org\/microeconomics\/sce#\/creditavail-1\">Survey of Consumer Expectations (SCE) report<\/a>, 58 percent believe it will be harder to obtain credit a year from now.<\/p>\n<p>Financial experts suggest that it\u2019s crucial for the typical\u00a0indebted consumer to modify their household finances before rates become too high. That consists of creating a budget, spending within your means, paying off debt, putting together an emergency fund, and continuing to save.<\/p>\n<p>\u201cIt\u2019s important to carefully evaluate reoccurring expenses and cut back on the \u2018auto charges\u2019 that could be done without,\u201d Shmuel Shayowitz, the president and chief lending officer at Approved Funding, told The Epoch Times. \u201cGet out of the habit of living off credit cards and borrowed funds and defer purchases whenever possible.\u201d<\/p>\n<h2>Saving and Investing<\/h2>\n<p>When central banks slash interest rates, consumers usually transition away from saving and shift toward the equities market to shield their money from inflation. However, now that the nation is entrenched in the middle of a tightening cycle, depositors will receive better interest-bearing payments on their savings.<\/p>\n<p>Unfortunately, the real interest rate (inflation-adjusted) is still in subzero territory, meaning that savers continue to endure negative returns on their deposits.<\/p>\n<p>That can be mitigated by seeking out high-interest savings accounts, utilizing online financial institutions, investing in money market funds (mutual funds that park your money in U.S. T-bills and commercial paper), or inquiring about certificates of deposit (CDs) at your neighborhood bank.<\/p>\n<p>But Fed officials have insisted that they won\u2019t stop raising rates until they have successfully reined in 40-year-high price inflation. In addition, many FOMC members have noted that everyone needs to become accustomed to higher-for-longer interest rates, which would be positive news for habitual savers.<\/p>\n<p>The personal savings rate has been on a downward spiral, falling\u00a0to <a href=\"https:\/\/tradingeconomics.com\/united-states\/personal-savings\">5 percent<\/a> in July since peaking at nearly 35 percent.<\/p>\n<p>At the same time, investment portfolios have taken a hit under the current rising-rate economic climate. Typically, the U.S. central bank raising rates can have a domino effect. Consumer demand wanes, slowing business activity. Next, investors start seeing signs of a declining economy, prompting them to begin easing their investments or even trimming their holdings. That triggers a selloff, traders panic, and the equities arena is now stuck in a bear market.<\/p>\n<p>This has been evident in 2022 as the leading benchmark indexes have slumped throughout the Fed\u2019s tightening efforts. The Dow Jones Industrial Average has dropped more than 15 percent, the Nasdaq Composite Index has plunged about 27 percent, and the S&#038;P 500 has declined close to 20 percent.<\/p>\n<p>\u201cThe silver lining of a hawkish Fed and an ongoing global growth slowdown is that inflation expectations continue to decline. As previously commented, I think the market is more concerned with inflation than growth,\u201d Nick Reece, a portfolio manager at Merk Investments, said in a note to clients. \u201cAs always, the outlook remains data dependent and everyone needs to put probability and reward-to-risk assessments in the context of their strategy, process, and time horizon.\u201d<\/p>\n<div class=\"author_wrapper\">\n<div class=\"one_author_block round\">\n<div class=\"top_row\">\n\t\t\t\t\t<a href=\"https:\/\/www.theepochtimes.com\/author-andrew-moran\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/07\/WEB_AndrewMoran.jpeg\" alt=\"Andrew Moran\" \/><\/a><\/p>\n<p>Follow<\/p>\n<\/div>\n<p>Andrew Moran covers business, economics, and finance. He has been a writer and reporter for more than a decade in Toronto, with bylines on Liberty Nation, Digital Journal, and Career Addict. He is also the author of &#8220;The War on Cash.&#8221;<\/p>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The Federal Reserve raised interest rates by 75 basis points during its September policy meeting. After four previous increases, the benchmark fed funds rate now stands in the 3 percent\u20133.25<\/p>\n","protected":false},"author":1,"featured_media":1654297,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1654295","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1654295","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1654295"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1654295\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1654297"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1654295"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1654295"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1654295"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}