Federal Reserve guidance and October card data suggest an expected rate hold this week would not automatically lower U.S. borrowing costs, with new offers averaging 23.96%.
CNBC and The Associated Press reported that a hold is expected, but the Fed has not announced its decision. The Federal Open Market Committee (FOMC) meets Tuesday and Wednesday, Oct. 27-28, with a statement scheduled for Wednesday at 2 p.m. EDT (18:00 UTC). At its Sept. 16 meeting, the committee voted 12-0 to raise its target range by 25 basis points to 3.75% to 4%. EconoTimes previously covered Brown Brothers Harriman’s October hold outlook.
LendingTree’s analysis of about 220 popular cards from more than 50 issuers found that the average APR on new U.S. credit-card offers rose from 23.82% in September to 23.96% in October. The Fed says banks often use the federal funds target as one factor in setting the prime rate, a reference for credit-card and other loans. That link and the current card data suggest a hold would pause one source of upward pressure on variable-rate borrowing, but would not itself cut existing APRs.
Mortgage rates follow a different path. Freddie Mac’s weekly survey put the average 30-year fixed mortgage rate at 7.32% for the week of Oct. 22. The Fed says longer-term loan rates also reflect expectations for monetary policy and the broader economy.
Inflation remains above the Fed’s 2% goal. Bureau of Labor Statistics data showed consumer prices rose 3.7% over the 12 months through September, up from 3.4% through August; gasoline prices increased 9.1% in September. Minutes from the September FOMC meeting said most participants thought another rate increase would likely be appropriate by year-end, subject to incoming information. The minutes also noted that higher energy costs were putting particular pressure on low- and moderate-income households’ real disposable income.
For consumers, Navy Federal Credit Union Chief Economist Heather Long told CNBC that the outlook meant “really high borrowing costs for the foreseeable future.” CNBC also reported that savers continued to receive relatively attractive deposit yields.
The next U.S. consumer price report is scheduled for Nov. 10 at 8:30 a.m. ET. The FOMC’s next meeting is set for Dec. 8-9.
