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The Federal Reserve raises interest rates by 25 basis points; What does this mean for you?

The Federal Reserve of the United States raised benchmark interest rates by 25 basis points. Not long ago, forecasters were split on whether the March meeting would see rates rise by 50 basis points or 25 basis points. 

The latest bank crises forced the financial pundits to reassess their calculations, with the majority forecasting a 25 basis point increase and several publicly declaring that the Fed should push the pause button because the US banking system has yet to get its sea legs.

What Does It Mean For Americans?

The Federal Open Market Committee (FOMC) announced on March 22 that it has agreed to boost the target range for the federal funds rate to 4-3/4 to 5%. For Americans, this means increased interest rates and borrowing expenses in the future, making credit cards, loans, and mortgages even more expensive.

According to TransUnion’s Raneri, the impact of further rate hikes on consumer credit would undoubtedly continue to be felt by borrowers, particularly in areas such as mortgages and credit cards.

According to Ted Rossman, senior industry analyst at Creditcards.com, the most significant component of today’s Fed decision is the suggestion that this sequence of rate hikes is coming to an end.

Because the average rate is 20.35%, this series of rate increases has already added over $2,000 to the total interest expense (over 17 years) for someone making minimum payments on $5,805 in credit card debt, according to Rossman.

Overall, numerous experts believe that bank runs have done the Fed’s job for it, as the Fed has acknowledged how credit conditions have tightened, potentially reducing inflation, according to David R Russell, Vice President of Market Intelligence at TradeStation. 

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What Effect Will The Increase Have On The Economy?

The-federal-reserve-raises-interest-rates-by-25-basis-points-what-does-this-mean-for-you
The Federal Reserve of the United States raised benchmark interest rates by 25 basis points. Not long ago, forecasters were split on whether the March meeting would see rates rise by 50 basis points or 25 basis points.

In terms of the overall impact on the economy, she said that the higher level of restrictive rates, combined with a loss of confidence in the banking system, combined with a risk-off mentality, will likely spell continuous caution in the short-term trading and investing environment, adding that the tech sector will likely find relief in the idea that rate hikes after today are intended to pause.

According to Jeffrey Rosenkranz, portfolio manager at Shelton Capital Management, the Fed attempted to strike a balance with this fresh hike by keeping attentive in the fight against inflation while noting the real-world impact that current volatility will have on future economic activity.

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