Federal Reserve Chairman Jerome Powell is maintaining the option of raising interest rates again if inflation remains elevated and the economy continues to grow robustly.
Speaking at a recent International Monetary Fund (IMF) panel, Powell said that the progress made on moderating inflation has been gratifying but that there was still a long way to go to bring it to a 2% target rate.
"The labor market remains tight, although improvements in labor supply and a gradual easing in demand continue to move it into better balance," Powell said in a statement. "Gross domestic product growth in the third quarter was quite strong, but, like most forecasters, we expect growth to moderate in coming quarters. Of course, that remains to be seen, and we are attentive to the risk that stronger growth could undermine further progress in restoring balance to the labor market and in bringing inflation down, which could warrant a response from monetary policy."
Powell reiterated the central bank's commitment to return inflation to 2% and said that if appropriate, they would not hesitate to tighten policy further but said that the Fed would proceed carefully, evaluating economic data meeting by meeting.
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Mortgage rates dropping
Mortgage rates have slowly dropped in recent weeks after reaching nearly 8% for the popular 30-year mortgage loan. However, a serious drop in lending costs would depend on where interest rates are headed. While the expectation that the Fed will raise interest rates again this year is low, the central bank has not indicated how long rates will linger at their current range.
At its November meeting, the central bank maintained the short-term policy rate within a range of 5.25% to 5.5%. This will likely impact how quickly mortgage rates dip over the coming year.
Mike Fratantoni, Mortgage Bankers Association (MBA) chief economist and senior vice president, said at the recent MBA Annual Conference in Philadelphia that the Fed will likely cut interest rates three times in 2024 and expected mortgage rates to begin trending down over the next two years.
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Credit card balances soaring
The Fed's pause on interest rate increases should mitigate the likelihood of additional increases in credit card interest rates. That's good news for Americans who owe a collective $1.08 trillion on their credit cards, according to a recent report on household debt from the Federal Reserve Bank of New York.
Credit card balances spiked by $154 billion year over year, notching the most significant increase since 1999, and in the third quarter of 2023, grew by $48 billion, according to the New York Fed.
Meanwhile, interest rates on credit cards have reached historic highs, mainly in response to the Fed's aggressive campaign of rate hikes in 2022 and 2023. The average interest rate on a new credit card offer is up to 22.78%, according to WalletHub and the average consumer carries roughly $6,000 balance.
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