Live updates on expected interest rate increases
- The Fed is poised to raise interest rates on Wednesday for the sixth time this year.
- The hike will make it more expensive for consumers and businesses to borrow money.
- The central bank is raising interest rates to curb inflation, which is close to a 40-year high. But the higher interest rates risk pushing the economy into a recession.
The Federal Reserve is poised to raise interest rates on Wednesday for the sixth time this year. That increase will have a direct impact on consumers̵[ads1]7; wallets, making it even more expensive for them to get a mortgage and pay off credit card debt.
The central bank is raising interest rates to curb inflation, which is close to a 40-year high. September’s consumer price index report showed annual inflation fell slightly to 8.2%, but rose 0.4% on a monthly basis, beating economists’ expectations.
The Fed is facing growing calls from lawmakers, including at the United Nations, to halt rate hikes amid concerns it could ignite a painful recession. But it has not signaled it will hit the pause button anytime soon as it aims to bring inflation closer to its 2% target, even if it means job losses.
For now, at least, the labor market is strong. There are many vacancies and the unemployment rate is remarkably low. But economists don’t expect that to be the case in 2023, especially if the Fed continues to raise interest rates at an aggressive pace. If today’s rise comes in as expected – 75 basis points – it will mark the fourth straight increase at the high level.
Stay tuned for our coverage of today’s decisive interest rate decision:
When is the Fed rate hike decision?
The Fed’s decision will be announced at 2pm ET on Wednesday.
— Elisabeth Buchwald
When is Powell speaking today?
Fed Chairman Jerome Powell’s media conference will begin at 2:30 PM ET on Wednesday. USA TODAY economics reporter Paul Davidson will cover the event in person.
— Elisabeth Buchwald
What is the Federal Reserve System?
Ahead of the interest rate hike, it’s a good time to look at what the Federal Reserve system is.
We often associate the Fed with Powell and the building located in Washington, DC, but the Fed extends far beyond that. There are 12 regional banks located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco. Each bank has its own president.
There are 12 people responsible for deciding what to do with interest rates at each Fed meeting. Seven seats are filled by the Federal Reserve’s Board of Governors, which includes Chairman Powell and six other individuals nominated by the president and confirmed by the Senate. The New York Fed president casts a vote on interest rates at each meeting. The remaining four votes come from a rotating vote of the other regional bank managers.
— Elisabeth Buchwald
What are the current mortgage rates?
Current mortgage rates have exceeded 7% for the first time in more than two decades, leaving some Americans wondering if they should buy a home in this ever-changing housing market.
“Nobody saw this coming. We thought maybe a 5% high, but not a 7% rate,” Nadia Evangelou, senior economist and forecasting director for the National Association of Realtors told USA TODAY. As a result, Evangelou said the real estate association has adjusted its forecast several times this year.
The current 30-year fixed rate as of Tuesday is 7.22%, down 8 basis points from a week ago, according to Bankrate.com. Bankrate said the existing 15-year fixed-rate mortgage is at 6.47%, up 3 basis points from last week.
The average for a mortgage with an adjustable interest rate is 5.53%, up 5 basis points from the same time last week. An adjustable-rate mortgage is a mortgage with an interest rate that can fluctuate over time.
— Terry Collins
Are we in a recession right now?
While two consecutive GDP contractions in the first two quarters of this year met an informal benchmark for recession, the National Bureau of Economic Research looks at a broader range of economic activity, including employment, retail sales and industrial production, before determining when a recession begins and ends. The NBER is a non-profit, non-partisan organization that frequently publishes economic research. Within the NBER is a team of eight economists tasked with determining when recessions occur.
Most economists do not believe the US is in a recession, citing slowing but still vibrant job growth. However, there is little doubt that the economy is losing momentum as households and businesses curb spending amid soaring inflation and the Federal Reserve’s aggressive interest rate hikes aimed at curbing price increases.
– Paul Davidson
How to prepare for a recession
That said, it’s never too early to start thinking about how to prepare for a recession.
Try to put aside just enough to scrape by on a strict budget for three months in case you lose your job, said Brian Robinson, a financial advisor and partner with SharpePoint.
Also consider delaying “nice to have” purchases. For example, if your refrigerator breaks, get it repaired or buy a new one. But if the hair dryer you’ve owned for five years still gets the job done, just not as well as a newer one, keep it—and your money.
Be sure to take stock of all your monthly subscriptions and ask yourself which ones you can live without and cancel them.
— Elisabeth Buchwald
Federal Reserve meeting schedule
The Fed’s last meeting for the year will take place on 13-14 December. The central bank will then meet again on 31 January for its two-day meeting. Here is the meeting schedule for the rest of 2023:
- March 21-22
- 2-3 May
- 13-14 June
- 25-26 July
- 19-20 September
- 31 October – 1 November
- 12-13 December
— Elisabeth Buchwald
I bond rate
The Treasury announced on Tuesday that the interest rate on its inflation-protected I-bonds will fall to an annual rate of 6.89% for the next six months. Anyone can invest a minimum of $25 or a maximum of $10,000 each year.
— Jim Sergeant
Fed funds rates today
Ahead of the Fed’s upcoming interest rate hike, the funds rate varies between 3% and 3.75%. An increase of 75 basis points would push the range between 3.75% to 4%. The fed funds rate is the interest rate banks take to lend money to each other.
— Elisabeth Buchwald
How does raising interest rates help inflation?
Rising interest rates raise the cost of borrowing for consumers and businesses, which greatly reduces demand for products and services, causing suppliers to cut prices or stop raising them. But the immediate effect varies considerably between individual goods and services.
— Elisabeth Buchwald and Paul Davidson
The stock market today
Stocks opened lower before the Fed’s decision. The Dow Jones Industrial Average was down 0.3% while the S&P 500 was down 0.7% and the Nasdaq was down 1.3% at 12:30 pm ET.
— Elisabeth Buchwald
S&P 500 performance during the last five rate hikes
In all but one of the last five Fed rate hikes, the S&P 500 closed at least 1% higher. The last hike, which took place at the end of September, was the exception. Before the decision, the index was higher, but fell immediately after the Fed announced the 75-point increase. In recent trading hours, the S&P 500 alternated between positive and negative territory several times.
— Jim Sergeant
Federal Reserve rate hike history 2022
Here’s when the Federal Reserve raised its short-term interest rate this year, and the amount it raised it by.
- March 17: 0.25 percentage points
- May 5: 0.50 percentage point
- June 16: 0.75 percentage points
- July 28: 0.75 percentage points
- September 22: 0.75 percentage points
– Paul Davidson
What is inflation?:Understand why prices are rising, what’s causing it and who it hurts the most.
What is a recession?:The financial concept explained and what happens during one.
What does it mean when the Federal Reserve raises interest rates?
When the Fed raises interest rates, it becomes more expensive for banks to borrow money from each other. Banks pass these higher interest rates on to consumers by making it more expensive for them to get a mortgage, a loan, pay off credit card debt and more.
On the flip side, Fed rate hikes increase the interest you earn on money in a savings account.
—Orlando Mayorquin
How will the stock react to the Fed?:Here’s how the stock market has moved with all 5 Fed rate hikes
In Bond interest:Why I chose I Bonds to protect my sons’ inheritance from 40 years of high inflation
