![]() ![]() Global turmoil, like Russia’s invasion, often spurs a “flight to safety” response among investors around the world: Many rush to buy Treasurys, which are regarded as the world’s safest asset. These include investors’ expectations for future inflation and global demand for U.S. Long-term mortgages tend to track the rate on the 10-year Treasury note, which, in turn, is influenced by a variety of factors. Sometimes, they even move in the opposite direction. Still, mortgage rates don’t necessarily rise in tandem with the Fed’s rate increases. They already have in the past few months, partly in anticipation of the Fed’s moves, and will probably keep doing so. ![]() With inflation likely to stay elevated, in part because of Russia’s invasion of Ukraine, the Fed may have to drive borrowing costs even higher than it now expects. The officials expect four additional hikes in 2023, which would leave their benchmark rate near 3%.Ĭhair Jerome Powell hopes that by making borrowing gradually more expensive, the Fed will succeed in cooling demand for homes, cars and other goods and services, thereby slowing inflation. On Wednesday, the Fed’s policymakers collectively signaled that they expect to boost their key rate up to seven times this year, raising its benchmark rate to between 1.75% and 2% by year’s end. That would mean higher borrowing rates well into the future. But with inflation raging at four-decade highs, economists and investors expect the central bank to enact the fastest pace of rate hikes since 2005. The Fed’s initial quarter-point rate hike Wednesday in its benchmark short-term rate won’t have much immediate impact on most Americans’ finances. Savers may receive somewhat better returns, depending on their bank, while returns on long-term bond funds will likely suffer. Credit card interest rates and the costs of an auto loan will also likely move up. Record-low mortgage rates below 3%, reached last year, are already gone. WASHINGTON (AP) - Americans who have long enjoyed the benefits of historically low interest rates will have to adapt to a very different environment as the Federal Reserve embarks on what’s likely to be a prolonged period of rate hikes to fight inflation. Please look at the time stamp on the story to see when it was last updated. This is an archived article and the information in the article may be outdated.
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