The Federal Reserve on Wednesday said it is once again turning to its most powerful weapon to tamp down the hottest inflation in 40 years: Boosting interest rates.
the market swooned
Stocks tumbled after the announcement, with the Dow Jones Industrial Average shedding 0.7% in Wednesday afternoon trading. In its Wednesday "2022 has been a pretty brutal year for folks with credit card debt, and unfortunately it is likely to get worse before it gets better," he said in an email. However, it's possible that mortgage rates may not move significantly following the Fed's decision, he added."Remember that while the Fed's actions do impact mortgage rates, it doesn't directly set them," Channel noted.If there's one bright spot from the Fed rate hike, it's the impact on savings accounts and certificates of deposit.
That's an improvement on what savers used to get, but it's still trailing the rate of inflation. With inflation at 8.3% in August, savers are essentially losing money by putting their cash into a savings account earning about 2%. Still, it's better than the stock market, which this year is down almost 20%.Borrowers who take out new private student loans should prepare to pay more as rates increase. The current interest range for federal loans is between about 5% and 7.5%.
Higher rates mean that safe assets like Treasuries have become more attractive to investors because their yields have increased. That makes risky assets like technology stocks and cryptocurrencies less attractive, in turn.
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