Federal Reserve may pause interest rate hikes

The Federal Reserve presents two likely paths with widely varying outcomes.
Published: Jun. 13, 2023 at 2:05 PM MDT
Email This Link
Share on Pinterest
Share on LinkedIn

WASHINGTON, D.C. (KKCO) - The Federal Reserve is holding a critical meeting this week, and will issue an interest rate decision with two likely scenarios.

The reserve is expected to issue a change this week that could impact borrowing costs for all Americans. RSM Chief Economist said that consumers will likely feel “a sense of relief, a sort of period to breathe.”

After ten consecutive interests rate increases since March 2022, some economists, like Brusuelas, predict the Fed is going to pivot this month and issue a rare rate pause on the hikes.

“The Fed is trying to create a little bit of space where it can ascertain the lagged impact of the 500 basis points, or 5% of rate hikes that they’ve imposed on the economy over the last 14 months,” said Brusuelas. Economists say that if the Fed keeps current rates unchanged, it means borrowing costs would remain stable.

That creates a favorable environment for consumers looking to make large purchase— like buying a home or car.

Economists say this scenario could support consumer confidence and encourage spending.

“Interest rates on an automobile and on a mortgage are likely not to go up, and may even fall a bit as financial markets adjust to the new reality of the Fed policy shift,” said Brusuelas.

However, there is still the possibility that the Fed raises interest rates— if not this week, then soon. If that happens, the impact on consumers could be notable.

Higher borrowing costs would increase mortgage rates, credit car interest rates, and loan payments.

People with adjustable-rate mortgages or variable interest-rate loans could see an immediate impact, as their monthly payments could rise.

Bruseulas says such an increase is likely. “Odds are that they may choose to hike one or two more times before they’re done.”