WEST PALM BEACH, Fla. — The cost to finance a home or car is getting more expensive.
The Federal Reserve raised interest rates by three-quarters of a percentage point Wednesday, the sixth increase this year.
The move raised its key short-term rate to a range of 3.75% to 4%, its highest level in 15 years.
It's all part of an effort to stem rising inflation in the U.S.
"Inflation is still stubbornly high and is still running near 40-year highs," Greg McBride, the chief financial analyst with Bankrate.com, said Wednesday. "There are some early indicators that maybe it will ease off in months to come, but the fact is we've been head faked on that about two or three times already, so at this point, it's in the category of 'I'll believe it when I see it.'"
The average rate on a 30-year fixed mortgage, just 3.14% a year ago, surpassed 7% last week, mortgage buyer Freddie Mac reported. Sales of existing homes have dropped for eight straight months.
Interest rates on credit cards and mortgages are at their highest levels in decades.
Economists warn that the higher rates could put the country in a recession, prompting companies to shed employees.
McBride said that slowing inflation can take time, and the U.S. might not see relief until next year.
During a visit to South Florida on Tuesday, President Joe Biden remained optimistic about inflation.
"We have the lowest inflation rate of almost every major country in the world," Biden said. "We've done a lot to try to get it under control."
Outside the United States, many other major central banks are also rapidly raising rates to try to cool inflation levels that are even higher than in the U.S.
Speaking at a news conference, Chair Jerome Powell avoided sending any clear signal of whether the Fed's next expected rate hike in December might be only a half-point rather than three-quarters. He emphasized that the Fed would keep raising rates in the coming months, possibly to a higher level than it had forecast in September.
"We still have some ways to go," Powell said. "And incoming data since our last meeting suggests" that the policymakers might have to raise rates higher than they previously thought.
The Fed chair pointedly stressed that it would be "very premature" to think about halting the rate hikes to allow time to see how well they are working. Inflation pressures, he said, remain far too high.
Portions of this article courtesy of the Associated Press