In March, interest rates were increased – with six more increases scheduled before year end – marking the most aggressive pace in over 15 years. The Federal Reserve hopes to thwart rising inflation, which is at its highest levels in four decades.
Rising to a point between .25 percent and .5 percent, the benchmark federal-funds rate is increasing for the first time since 2018.
When the coronavirus pandemic hit the United States in 2020, rates were nearly at zero. Now, officials have hinted at raising the rate to nearly two percent by the end of 2022. By the end of 2023, rates could inflate as high as 2.75 percent, the highest since 2008.
Federal Reserve Chairman Jerome Powell said, “As I looked around the table at today’s meeting, I saw a committee that’s actually aware of the need to return the economy to price stability and determined to use our tools to do exactly that.”
The ballooned interest rates are a sharp reversal from only two years ago, when rates were near zero and the economy received a plethora of support as countless shutdowns plagued the country. Record job losses were recorded, along with a severe two-month recession.
Economic output has since recovered, thanks to huge federal stimulus and vaccination availability, but Federal officials were weary that inflation might not diminish as quickly as they once expected. The annual wage growth is near its highest pace in years, and the unemployment rate has fallen to 3.8 percent in February.
The average 30-year fixed-rate home loan jumped above 4.25 percent recently, according to the Mortgage Bankers Association. This escalation is an increase of almost a full percentage point since late 2021.
Housing vacancy rates have been at their lowest levels in decades due to a limited supply of homes and apartments combined with steady job gains. Through the past six months, rates went up at a 5.5 percent annualized pace, the largest increase since 1986, according to the Labor Department.
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Written by the digital marketing staff at Creative Programs & Systems: www.cpsmi.com.