Federal Reserve hikes key rate for 1st time in 3 years
The Federal Reserve raised its benchmark rate for the first time since 2023 to combat persistent inflation, potentially impacting borrowing costs. Officials projected another rate increase later this year.
The Federal Reserve raised its benchmark interest rate Wednesday for the first time since 2023 in an effort to quell stubbornly-high inflation.
The quarter-point increase lifts the Fed’s key rate to about 3.9% and, over time, could result in higher borrowing costs for loans and credit cards. In a set of quarterly projections, the Fed also signaled that its rate-setting committee expects to hike rates a second time later this year to 4.1%.
“Today’s policy action will support a timelier return” to the central bank’s 2% inflation goal, the Fed said in a statement.
The increase does not automatically translate into higher mortgage rates, which tend to follow the 10-year Treasury yield more closely than the Fed’s benchmark.
“A Fed hike would not automatically mean higher mortgage rates,” Jeff DerGurahian, loanDepot’s chief investment officer and head economist, told USA Today before Wednesday’s announcement.
DerGurahian said fixed mortgage rates could hold steady or decline if investors had already anticipated the increase and gained confidence that inflation was coming under control.
The Associated Press contributed to this report.
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