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FOMC ends year with quarter-point interest rate hike

FOMC ends year with quarter-point interest rate hike

The Federal Open Market Committee met for the eighth and final time this year, voting to raise interest rates by a quarter-point, setting the target range for the federal funds rate to 2.25-2.5 percent.

This marks the fourth interest rate hike of the year, and the first since the FOMC raised the rate to 2-2.5 percent in September. The increase also came in spite of the protestations of President Donald Trump, who has complained that higher interest rates are slowing the nation's economic growth.

In announcing the widely anticipated 0.25 percent increase to the federal funds rate, Federal Reserve Chair Jerome "Jay" Powell made clear the move was based not on political considerations, but on the fundamentals of the American economy, which were repeatedly characterized as "strong."

"Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate," a statement from the FOMC read. "Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year."

The committee also cited the fact that, on a 12-month basis, overall inflation and inflation for items other than food and energy both continue to remain near 2 percent.

The central bank also now has only two rate hikes scheduled for 2019, down from the three forecast in September, and just one expected in 2020.

Your loans may grow more expensive

For average Americans, this interest rate bump will likely translate to more expensive loans. Variable rates tied to market conditions tend to rise in tandem with the federal funds rate.

While any fixed-rate loans will remain unchanged, adjustable-rate mortgages, student loans, credit cards, auto loans and other types of debt could very well be impacted. Check the balances and interest rates to see if you will be paying higher bills as a result of today's decision. If you are affected, you may want to look into your refinancing options, which could help you avoid continued interest rate increases.

Consider refinancing or taking out a loan

Though the number of anticipated 2019 rate hikes is down from three to two, those concerned about current and future rate increases may be wise to consider refinancing their loans. By refinancing a variable loan to a fixed-rate loan, individuals can potentially reduce their monthly bills and be protected from future interest rate increases.

Aspiring homeowners should also carefully consider all of their options before taking out a home loan. Rising interest rates tend to scare away potential borrowers, though if rates are only expected to continue increasing over the next two years, it may still be better to act sooner rather than later. If you would like to get started on the lending process, The Federal Savings Bank can help.