The Fed Holds Rates Steady, but Two Officials Wanted a Hike
The federal funds range stays at 3.75 to 4 percent, so card, home equity and savings rates shouldn't move much. The two dissents point to inflation worries.
The Federal Reserve left its benchmark rate unchanged on Wednesday, keeping the federal funds target range at 3.75 to 4 percent, where it has been since a quarter-point increase on September 16. The vote was 10 to 2. Fed governor Lisa D. Cook and Cleveland Fed president Beth M. Hammack dissented because they wanted to raise the range another quarter point.
In its statement, the committee said the economy is expanding at a strong pace, with resilient consumer spending, strong productivity and robust business investment, while job gains have kept up with the workforce and unemployment has changed little. It said inflation remains elevated and that more information will help it decide how to get inflation back to its 2 percent goal on time.
What it means for you: with no change, the prime rate stays at 7 percent, so credit card and home equity line rates, which are tied to prime, should hold steady. Savings and CD yields usually follow the Fed's range and are unlikely to move much right away. Mortgage rates follow the 10-year Treasury yield rather than the Fed; Freddie Mac's 30-year average was 7.32 percent last week, and the next weekly reading is due Thursday. Two votes for a hike suggest some officials see more risk of inflation than of a slowdown, which can keep longer-term rates from falling much. The Fed's last decision of the year is December 9.
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