While widely expected, the Federal Reserve raised interest rates this morning, this time by half a percent, in a continued effort to combat rising prices. While the increase was smaller than previous moves this year, the the policy rate—4.25-4.5 percent—is now at the highest point since 2007.
According to the New York Times, rates are expected to rise to 5.1 percent next year, up from 4.6 percent in that last annual forecast earlier this year.
“Recent indicators point to modest growth in spending and production,” the Fed said in its statement. “Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.”
While mortgage rates have been on a relative decline over the past few weeks, they remain way above the pandemic lows many buyers and refinancers took advantage of just months ago. As the Fed once again increases its target rate, it’s likely to hit banks as its more expensive to borrow money, which in turn can lead to higher interest rates on loans.