SAN FRANCISCO (KCBS RADIO) – The Federal Reserve is meeting Tuesday and Wednesday this week and an announcement is expected for another interest rate hike, making loan rates even higher than they already are.
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This hike will be a bit more customary at around half a percentage, according to Greg McBride, Chief Financial Analyst at Bankrate.com, a New York-based financial services company.
"Of course, making the super size rate hike three-quarters of a percentage point in the last several months," he said. "That in and of itself was a step they hadn’t taken in 28 years."
But they did this in four consecutive meetings alone this year in response to the inflation issues plaguing the economy at the moment.
The inflation right now is at the highest its been in the last four decades, according to McBride.
The larger rate hikes are also due to a relatively late start the Federal Reserve got this year, and now they’re playing catch-up.
"For years we saw the Fed really prefer to move in quarter-point increments," he said. From 2004 to 2006, the rates were raised 17 times, always in quarter-point increments.
But right now inflation is still north of seven percent and the labor market is still relatively strong.
"There's still a lot of concern not only about not only the broad base inflation but the fact that it might become entrenched and make the Fed's job that more difficult," he said.
As a result, loan rates are going up, which will continue into the new year. For consumers, it means that the credit card interest rate will go up starting in January.
"It's going to make it more expensive to buy a car if you're going to be borrowing for a car loan next year, that rate’s going to continue to go up," said McBride.
The goal is to slow the economy down and get a handle on the inflation.
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