Live updates on expected interest rate hikes
The Federal Reserve is expected to raise interest rates by half a percentage point at the end of its two-day policy meeting on Wednesday to continue its fight against inflation.
Inflation, as noted in Tuesday’s CPI report, eased to 7.1% in the 12 months through November from a solid pace of 9.1% in June, giving the Fed an opportunity to scale back rate hikes. However, the Fed is still far from its 2% inflation target, which means this is unlikely to be the last rate hike, economists say.
The Fed has raised interest rates six times this year to a range of 3.75% to 4% from nearly zero at the start of the year. The last four increases were replaced at 0.75 percentage points each. With another half-point increase expected, the cumulative increase to date would rank among the sharpest increases since the 1980s in an effort to tame the highest inflation rate in 40 years.
Besides the expected interest rate hike, the central bank will release its summary of economic forecasts for this year, 2023, and the next two years, as well as for the long term. The Federal Reserve releases these forecasts four times each year.
A little relief for those in debt:The Fed is preparing to announce a smaller rate hike but the impact is still to come
Most economists expect the Fed to raise its average inflation forecast for 2023 as well as the level it sees the short-term federal funds rate at.
What are the dates when the Fed will raise interest rates in 2022?
Here’s when the Fed raised the short-term interest rate this year, and how much it raised that rate.
- March 17: 0.25 percentage point
- May 5: 0.50 percentage point
- June 16: 0.75 percentage points
- July 28: 0.75 percentage points
- September 22: 0.75 percentage points
- November 2: 0.75 percentage points
–Elisabeth Buchwald
What are the current mortgage rates?
The average 30-year fixed mortgage rate, as of Dec. 13, was 6.33%, down from a peak of 7.08% earlier this year, according to Freddie Mac.
Mortgage rates have been dropping in the past few weeks amid signs that inflation has peaked and the Federal Reserve may stop raising interest rates and shift to cutting rates next year.
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What is the prime interest rate?
The prime interest rate, currently at 7%, is the interest rate that a bank charges on loans to its best, highest credit-scoring customers. It is often used as a reference rate (or base rate) for many types of loans, including loans to small businesses and credit card loans.
Although the Federal Reserve does not set the base rate, many banks choose to set their base rates based in part on the federal funds rate, which is set by the Federal Reserve Bank. This means that it is likely to rise when the Federal Reserve raises interest rates on Wednesday.
The Fed announces the base rate, which is published by the majority of the twenty-five largest banks in the bank website.
– Medora Lee
Who runs the Federal Reserve?
The three main entities of the Federal Reserve are: the Federal Reserve Board of Governors, the Federal Reserve Banks, and the Federal Open Market Committee (FOMC).
- The seven members of the Board of Governors are nominated by the President and confirmed by the Senate. The full term is 14 years. One semester starts every two years, on February 1st of even-numbered years.
The Chairman (currently Jerome Powell) and Vice Chairman (now Lyle Brainard), as well as the Vice President for Oversight (currently Michael Barr), are nominated by the President from among the members and confirmed by the Senate. They serve a four-year term in these roles.
- Each of the twelve Federal Reserve Banks is separately incorporated and has a nine-member board of directors. Boards of directors oversee the management and governance of banks, the balance sheet and overall performance, the audit process, and the overall strategic goals and directions.
Each bank has a president who serves a five-year term, overseeing day-to-day operations and serving, in rotation, as a voting member of the Federal Open Market Committee, or policy-making committee. The Federal Open Market Committee sets, among other things, interest rates.
- The FOMC is made up of 12 voting members – the seven members of the Board of Governors; President of the Federal Reserve Bank of New York; and 4 of the remaining 11 Reserve Bank Chairs, who serve one-year terms on a rotating basis. All 12 Reserve Bank chairmen attend FOMC meetings and participate in FOMC discussions, but only chairmen who are FOMC members at the time are entitled to vote on policy decisions.
– Medora Lee
stock market today
Major stock indices are heading higher as investors await the outcome of the Fed’s policy meeting this afternoon.
Last year, the benchmark S&P 500 rose 20.32 points, or 0.51%, to 4,039.97. The Dow Jones Industrial Average rose 134.72 points, or 0.39 percent, to 34,243.36 points, and the Nasdaq 100 rose 66.56 points, or 0.59 percent, to 11,323.37 points.
–Medora Lee
How about 10 years of treasury?
Thirty-year fixed-rate mortgages track movements in 10-year Treasury notes and are affected by the Federal Reserve’s short-term key rate only indirectly. On Tuesday, the 10-year yield fell below the psychological level of 3.5% to 3.488%, from 3.611% the day before. Bond yields move inversely to bond prices.
– Medora Lee
What is the focus of the Federal Reserve?
Fed pivot is when the Fed reverses its current policy.
In this case, since the Fed is in a rate-raising cycle, that would mean that the Fed will start cutting rates. This is not expected to happen anytime soon, but investors are eager to look for clues as to when it could happen. Some economists think this could happen in the second half of 2023 while others say it won’t happen until 2024.
– Medora Lee
How will the Fed’s move affect higher-interest savings accounts?
“However, future price gains may be limited to savings accounts and short-term CDs,” or certificates of deposit, said Ken Tomin, senior industry analyst at Lending Tree and founder of DepositAccounts.com. They slowed and in a few cases, rates fell in a way that was similar to the decline in the Treasury yield from a long time ago.”
– Medora Lee
How many Federal Reserve Banks are there?
There are 12 Federal Reserve Banks, with a total of 24 branches nationwide. These banks serve as the “operating arms” of the Federal Reserve System.
Each bank operates in its own geographic area of the country and collects data on the business and needs of the communities it serves. This data is then used to help formulate monetary policy dictated by the Federal Reserve.
– Medora Lee
What should we expect the Fed to do and say today about interest rates?
Economists expect the Fed to raise the benchmark short-term federal funds rate by half a percentage point, which it will be Down from the 0.75 percentage point increase at each of the last four policy meetings.
In addition to the Fed’s policy statement announcing price action, the Fed released its summary of economic outlook this month. In it, economists expect to see the Fed beef up its forecast for how high the federal funds rate will be next year. Most economists expect the Fed to raise its average forecast for the federal funds rate to about 5% from 4.6% in September, the last time it issued its forecast.
– Medora Lee
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When does the Fed announce its next rate hike?
The The Fed’s decision is announced at 2 p.m. ET on Wednesday.
Elisabeth Buchwald
What time does Powell speak today?
Federal Reserve Chairman Jerome Powell’s briefing will begin at 2:30 p.m. ET on Wednesday. USA TODAY’s economics correspondent, Paul Davidson, will cover the event in person.
Elisabeth Buchwald
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What is the current federal funds rate?
The current federal funds rate, the interest rate banks charge for lending to each other, is between 3.75% to 4%. In fact, it’s closer to 3.83%, according to an analysis by the Federal Reserve Bank of New York.
–Elisabeth Buchwald
Elisabeth Buchwald is the personal finance and markets correspondent for USA TODAY. You can follow her on Twitter Elisabeth Elizabeth Subscribe to our Daily Money newsletter here.
Medora Lee is USA TODAY’s money, markets and personal finance correspondent. You can reach her at mjlee@usatoday.com.
Paul Davidson, USA TODAY’s economics reporter.
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