Déjà vu all over again, again

The Federal Reserve’s policy-making committee unanimously voted to raise interest rates by 0.75% for the fourth straight time yesterday in an effort to tame inflation (which increased 8.2% year-over-year in September).

🏛️ More details… It continued the Fed’s most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation was this high.

• Benchmark interest rates are now set at a range between 3.75% and 4%. That’s the highest level since 2008, and up from near-zero as recently as March.
• The central bank’s official statement, published yesterday, said “ongoing increases” will likely be needed to reach its commitment of returning long-term inflation to 2%.

📈 Big picture: The decision to raise interest rates affects borrowing costs throughout the entire US economy. It also increases returns for savings accounts, bonds, and CDs. Some notable examples:

• The average 30-year fixed mortgage rate has nearly doubled since mid-March (3.85% → 7.08%).
• The yield on a two-year US Treasury bond has increased from 0.73% at the start of the year to 4.54% in November.
• Average credit card interest rates jumped to 22.2% in October, up from 16.3% in February. It’s also the highest level since LendingTree began tracking that data in 2018.

👀 Looking ahead… Fed Chair Jerome Powell said the central bank is considering slowing the pace of rate increases to 0.5% or lower – “and it may come as soon as the next meeting [Dec. 14] or the one after that [Feb. 1]. No decision has been made.” Though along with this seemingly good news, he also indicated the bank expects to raise rates to a peak level that’s higher than anticipated.