The Federal Reserve is hiking its benchmark interest rate for the third time this year. Chairman Jerome Powell says this gradual increase is a result of a healthy economy after the 2008 financial crisis.
“We took another step on the path with a quarter-point increase in short-term interest rates,” Powell said Wednesday.
He added the increase will help the American economy.
“These rates remain low and my colleagues and I believe that this gradual return to normal is helping to sustain this strong economy for the longer run benefit for all Americans.”
What does that mean for consumers? Not much, at least in the near-term, according to Robert Frick, corporate economist for Navy Federal Credit Union.
“We have gotten so used to artificially low rates for so long that a mortgage rate around four-and-a-half percent is making people freak out when in fact, generally mortgage rates are at least six percent,” he says.
However, more rate hikes are likely this year and next, so Frick says those will start to add up in terms of credit card balances and taking out car loans and home equity lines of credit. But he says it’s a double-edged sword that has benefits as well.
“Commercial banks, which are still lagging, but you’ve seen online banks and credit unions really raise their savings rate, so you can get much better rates on your savings accounts, your money market and especially in your certificates of deposit.”