After more than a year of steady rate hikes, Federal Reserve System held its own the target federal funds rate is stable Wednesday.

However, it offers little relief for households record high borrowings costs.

“It’s not like rates are going down,” said Tomas Philipson, a University of Chicago economist and former chairman of the White House Council of Economic Advisers.

In fact, borrowing costs are likely to climb higher in the second half of the year: Fed officials project that another two-quarters of a percentage point is on the way by the end of 2023.

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From March 2022, the central bank increased its reference rate 10 times in a row to a target range of 5%-5.25%, the fastest pace of tightening since the early 1980s. Inflation has begun to cool, but still remains well above the Fed’s 2% target.

At the same time, borrowers are paying more on credit cards, student loans and other types debt.

What the Federal Funds Rate Means for You

Wage growth has not been able to keep up with higher prices for many Americans. As a result, the majority households are cramped and they’re borrowing just as borrowing rates hit record highs, Philipson said.

“They’re getting hit,” he added.

The exterior of the Marriner S. Eccles Federal Reserve Board Building is seen in Washington, DC on June 14, 2022.

Sarah Silbiger | Reuters

The federal funds rate, set by the central bank, is the interest rate at which banks borrow and lend overnight.

Although it’s not the rate consumers pay, the Fed’s actions still affect the loan and savings rates they see every day. The Fed’s current benchmark rate is the highest since August 2007.

Here’s a breakdown of how this affects consumers:

Credit Cards

From the majority Credit Cards have a variable rate, there is a direct link to the Fed benchmark. As the federal funds rate rose, so did the prime rate and credit card rates followed.

Annual percentage rates on credit cards now average more than 20%, an all-time high. Plus, when most people feel stretched by higher prices, more cardholders carry the debt from month to month.

Credit card rates today are probably as high as they have been in decades.

Matt Schulz

Principal Credit Analyst at LendingTree

According to Matt Schulz, chief credit analyst at LendingTree, there isn’t much relief in sight for those carrying a balance.

“The truth is that today’s credit card rates are probably as high as they have been in decades and are likely to climb even higher in the near future, even if the Fed decides not to raise rates this month,” he added. he said.

Housing loans

Although 15 years and 30 years mortgage rates are fixed and tied to Treasury yields and the economy, anyone buying a new home has lost significant purchasing power, in part due to inflation and the Fed’s policy actions.

Rates are now off their recent highs but not by much. The average rate for a 30-year fixed-rate mortgage is currently around 6.7%, according to Freddie Mac, down slightly from October but still well above a year ago.

“Mortgage rates eased after three weeks of gains,” said Sam Khater, chief economist at Freddie Mac. “While elevated rates and other affordability issues persist, inventory continues to be the biggest hurdle for potential homebuyers.”

Other home loans are more closely tied to the Fed’s actions. Adjustable rate mortgagesor ARMs and home equity lines of credit, or HELOCs, are tied to the prime rate. Most ARMs adjust once a year after the initial fixed rate period. But the HELOC rate adjusts immediately. And already, the average rate for HELOCs is up to 8.3%, a 22-year high, according to Bankrate.

Car loans

Although car loans are fixed, payments increase as all car prices rise along with interest rates on new loans. So if you plan to to buy a caryou will spend even more in the coming months.

The average five-year new car loan rate is now 6.87%, the highest since 2010, according to Bankrate.

Keeping up with higher costs has become a challenge, research showswith more borrowers falling behind on their monthly loan payments.

Student loans

Darren415 | Warehouse | Getty Images

Federal student loan rates they are also fixed, so most borrowers are not immediately affected by the Fed’s actions. But starting in July, college students who take out new direct federal student loans will see interest rates increase to 5.50% — up from 4.99% in the 2022-23 academic year and 3.73% in 2021-22.

Right now, anyone with existing federal education debt will benefit from 0% rates until the payment freeze ends, which the U.S. Department of Education says could happen. autumn.

Private student loans tend to have a variable rate tied to Libor, prime or treasury bills – and that means those borrowers are already paying more in interest. However, how much more varies by benchmark.

Savings accounts

While the Fed has no direct influence on deposit rates, yields tend to correlate with changes in the target federal funds rate. The savings account rates at some of the biggest retail bankswhich were near the bottom most of the time the Covid pandemicthey are currently up to 0.4% on average.

Thanks in part to lower overhead costs, rates on the highest-yielding online savings accounts are now over 5%, the highest since the 2008 financial crisis, according to Bankrate.

With the Fed skipping rate hikes this meeting, those deposit rate hikes are likely to slow, according to Ken Tumin, founder of

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