Another Rate Hike
As posted on Acorn.com
By Stacy Rapacon
On March 21, the Federal Reserve, now headed by new chair Jerome Powell, announced its first interest rate hike of 2018 (and sixth since December 2015). That rate is the one banks use to set their rates for credit cards, savings accounts and other consumer financial products, which means an increase is a pretty big deal.
Overall, the trend upward is a good thing. The reason the country’s central bank, or Fed, kept its “benchmark” rates low for the last decade was to help pull the U.S. economy out of the Great Recession. Low rates were intended to make it easier for people and businesses to borrow money, which in turn could give the economy a boost.
Now we’re seeing that mission (kind of) accomplished, based on a much improved labor market and a solid GDP growth rate, which measures the growth in the value of goods and services produced by U.S. citizens and companies. So the Fed’s bumping up rates again.
Even with the increases, though, rates are still pretty low. The federal funds rate, which banks and credit unions charge each other to lend money overnight, has been hovering around 1.42 percent. And the new increase is just a quarter of 1 percent to a range of 1.5 to 1.75 percent.
What does all of this mean for us?