The Federal Reserve Isn’t Raising Interest Rates — Yet

How to prepare for the inevitable hike.
  • The Fed announced it will be patient on interest rate hikes, while the benchmark remains 2.25 percent to 2.5 percent.
  • It is anticipated that there will be two interest rate hikes in 2019.
  • With an interest rate hike, items like housing and credit cards could be affected.

On Jan. 30, the Federal Open Market Committee (FOMC) met and made critical decisions on American fiscal policy. First, the Federal Reserve decided that while the benchmark rate is still 2.25 percent to 2.5 percent, it will hold off and remain patient on rate hikes for the near future.

Federal Reserve Chairman Jerome Powell cited inflation concerns as well as significant economic cross-currents — U.S.-China trade tensions, Europe and Brexit, general slowdown in global growth — as key issues that influenced the Fed’s decision, according to the Wall Street Journal.

The decision marks a sharp about-face in policy for the Fed when compared to just over a month ago. In December 2018, the Fed raised its benchmark interest rate by a quarter percentage point for the fourth time that year and anticipated two more hikes in 2019.

How the Federal Reserve Interest Rate Decision Affects Your Wallet

The Fed’s decision not to raise interest rates has both direct and indirect effects on the average American’s wallet. In fact, Fed interest rate hikes impact all revolving loans with variable rates. That means the federal funds rate directly impacts interest rates on credit cards, adjustable-rate mortgages, home equity lines of credit and even certain student loans.

A Better Way to Bank

Credit Card Interest Rates Would Likely Rise

If the Fed had decided to raise interest rates, it would’ve likely pushed up credit card interest rates since the majority of them have variable APRs. So, if you’re carrying a balance on your credit card, that entails higher interest charges and monthly minimums.

Related: Why Trump Doesn’t Want Interest Rates to Go Up Anymore

Mortgage Rates Would Likely Increase and Make Housing More Expensive

Another crucial area affected by the Fed’s rates is housing. As the Fed has steadily raised interest rates since 2015, mortgage rates have been increasing in turn. Higher mortgage rates make housing more expensive by increasing the cost of the mortgage loan and thus how much you pay per month. According to Zillow, this rise in mortgage rates is contributing to America’s sluggish housing market as buyers get priced out by the rising costs of buying a home.

What to Expect in the Future and How to Prepare

Fortunately for prospective homebuyers, the Fed decided against raising interest rates for the time being. That being said, the Fed still intends to raise interest rates, just later than planned. When that happens, Americans will feel these effects.

Rather than sit and wait for the next rate hike, Americans should do some prep work on their finances. For example, start paying down credit card balances, especially if your credit card APR is on the higher end.

Click through to see how your finances measure up to the average American’s.

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About the Author

Andrew DePietro

Andrew DePietro is a finance writer with years of experience covering topics such as taxation, Social Security, entrepreneurship, investing, real estate and housing markets. His work has appeared on MSN, Yahoo Finance, Fortune, Forbes, CBS and U.S. News. Before writing for GOBankingRates, Andrew worked as a research assistant and graduated from the University of Pennsylvania with a degree in History.

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