The Federal Reserve will likely keep interest rates in their current target range of 4.25% to 4.5%. The decision would come after the close of their June roundtable. Traders and market analysts are closely watching for updates on the central bank’s outlook on future interest rate adjustments, particularly in light of ongoing economic uncertainties.
As of June 13, the current average interest rate for 30-year fixed mortgages is 6.89%. That’s an incredible jump over past years. It is a mirror of the large financial picture forged largely by the money printer go brrrrr economic philosophy of the Fed. Home equity loan rates increased to an average of 8.4%, up from 5.96% in March 2022. This substantial jump is evidence that potential homebuyers are feeling the effects of high borrowing costs.
In addition, credit card borrowers are now incurring an average interest rate of 20.12% on their credit card debt. This inflation-adjusted high borrowing cost continues to put a squeeze on consumers that are increasingly up to their necks in debt for everyday expenses. Yields on the breaking-even proxy of money market funds have increased to 0.44%. That’s a big increase from just 0.08% as recently as March 2022, providing investors with a long-overdue yield.
Five-year CDs are on a record-setting tear. As of June 13, their maximum annual percentage yields climbed to 1.71%, a far cry from the measly 0.50% they offered in March of 2022. These changes in financial products demonstrate the ever-evolving changes in the market that are occurring as the Fed continues to steer its monetary policy.
Policymakers are going to need to tread carefully. They’re grappling with dubious economic indicators and mounting external pressures, from President Donald Trump’s tariff policies to rising Middle Eastern tensions. Due to the war between Israel and Iran, energy prices have skyrocketed. This new hike exacerbates the inflationary pressures the Federal Reserve is already forced to consider in their deliberative process.
Given all of these considerations, inflation expectations are going to be the key to the Fed’s perspective moving forward. Market participants are most excited to hear how all of these geopolitical occurrences as well as the most recent economic indicators will shape future monetary policy.
“So we have a stupid person.” – President Donald Trump
“Europe had 10 cuts, and we had none. And I guess he’s a political guy, I don’t know. He’s a political guy who’s not a smart person, but he’s costing the country a fortune.” – President Donald Trump
In this extremely uncertain environment, the messaging that comes from the Federal Reserve post-June meeting could prove crucial. So stay tuned to see where they go from here! Investors and analysts have been combing every official utterance from the Fed for clues about possible rate cuts later this year. Traders are simply trying to understand what the central bank’s long game is for maintaining economic growth without stoking inflation.