The Federal Reserve raised interest rates in June and said two more rate increases could be expected in 2018, thanks to a strong economy and a decade of historically low rates. The Fed expressed assurance that the economy would not falter.
Fed chairman Jerome Powell continues to express optimism in the economy, saying that it’s strengthened since the 2008 financial crisis and is now more normal. This means that the Fed is likely to let the economy take its course at some point. Unfortunately, they are likely to raise interest rates a few more times before that happens.
Why Car and Home Buyers Aren’t Happy About the Rate Hikes
It may be good news for Americans in general, but rate increases are not a welcome occurrence for anyone looking to borrow money for a home, car or other large purchase. This could be especially true for those with less than perfect credit who may have a difficult time securing funds for cars and homes. One loan provider adds insight into how the rate adds to the burden of some of the most vulnerable borrowers.
“From unexpected medical bills to unscheduled home or automotive maintenance, there comes a time in most of our lives when we are blindsided by an expense that we just don’t know how we will be able to pay. In such situations, [borrowers need an alternative lending source that can provide them with the support they need to get back on their feet and rebuild,” according to Embassy Loans, a leading provider of title loans Orlando.
Just to recap the trend, June’s rate hike was the second one this year, and there have been a total of seven since the economy recovered from the Great Recession. These increases brought the benchmark rate up by 1.75 to 2 percent. The rate hasn’t been this high since the summer of 2008, and the Fed cut rates to nearly 0 percent to stimulate a contracting economy that remained shaky for the next five years, despite the lower rates.
All Part of the Plan?
This year’s rate increases are part of a planned return, being conducted in gradual steps, to levels that are more in line with historical interest rates. The target inflation rate is 2 percent and the Fed has committed to achieving that rate.
There are concerns by those who question the continuing rise of interest rates. For example, the wage rate has stagnated or experienced sluggish growth in many areas. In theory, a tight labor market should drive wages up as businesses compete for fewer resources. So far, that’s been slow to happen.