Written By: Ryan Rinehart, Financial Advisor

Last week the Federal Reserve raised the target federal funds rate for the eighth time in a row. These hikes have obviously been due to their effort to try and calm the rising inflation we’ve seen. Last weeks hike was a bit more modest and only came in at .25, this was thanks to recent signs that inflationary pressures have started to cool down. 

So, what does the federal funds rate discussed above mean to you? This rate is set by the US central bank, and is the interest rate that banks borrow and lend to one another. This rate, while not being the rate consumers pay, still does affect the borrowing and savings rates consumers like us see every day. 

This hike will cause financing costs to be higher for many consumers, therefore adding financial pressure to many American households. Because of this, we’ve seen interest rates continue to rise. Here are some ways that these interest rate increases can affect you: 

1. Credit Card Rates 

Many Americans unfortunately have had to use credit cards to help combat the rising costs for their day to day living expenses, which has caused credit card balances to significantly increase. This increased balance is now becoming even more expensive because as the federal fund rate rises, your credit card rate likely will follow suit. Most credit cards have a variable rate, so we often see this increase as the federate funds rate rises. 

According to an analysis by WalletHub, the rate hikes will cost credit card users holding a balance at least an additional 1.6 billion in interest charges in 2023. 

2. Mortgage Rates stay high 

If you’re someone that’s in the market for a new home, you’ve probably noticed the drastic rise in mortgage rates. They’ve started to come down recently but are still at a 10-year high. The average interest rate for a 30 year fixed rate mortgage is up almost 3% from a year ago. It currently sits at 6.4%, compared to 3.55%. These changes have caused buying home to be a challenge for many. 

3. Auto Loans are more expensive

Similar to those of you searching for a new home, if you’re someone currently in the market for a new car, you’ve probably been shocked at the prices for cars. While interest rates have risen, so have the price for cars. The average interest rate on a five-year new car loan is currently 6.18%. It was under 4% last year. Unfortunately, with the feds latest increase, we might see interest rates rise even higher on their car loans. 

So, while the above news isn’t the most positive, I wanted to wrap this article up with some good news. Due to these rising interest rates, we’ve also seen rates on savings account increase. These rates were near rock bottom during the pandemic. If you’re someone with a high cash 

balance in the bank, consider searching for a savings account that offers a higher rate. Someone online savings accounts are over 4%. 

I hope this article helped answer questions on why the federal funds rate can impact you personally. If you need guidance or have questions on how to combat any concerns you have, please reach out to us and one of advisors will be happy to help.

Say What?

For real this time? Tom Brady says he’s “retiring for good” one year after his first retirement announcement. He made a short and sweet announcement on social media, and says his career has been an “absolute dream” and he wouldn’t change a thing. Listen below.

This week in history

1942 – Daylight Savings Time started in 1942, and at the time was called “war time.” It was imposed to conserve fuel, and was repealed in 1945 but individual states continued to impose their own “standard” time. In 1966 Congress passed legislation to permanently set a standard time for the nation. 

1952 – Queen Elizabeth The Second becomes queen of England when her father, King George VI died. 

1961 – President John F. Kennedy delivered a “health message” asking Congress for a health insurance program (Medicare). 

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