Federal Reserve rate hikes can send shockwaves through stock markets and put many people to sleep. But just because the nitty-gritty of the country’s fiscal policy isn’t exciting to most does not mean we’re unaffected. For example, the cost of existing credit card debt has already increased by $15.5 billion due to the Fed’s rate hikes thus far this year, and it will rise by another $5.3 billion this year if the Fed raises its target rate on September 21, as expected . Plus, more rate hikes are expected from the Fed before the end of the year , which will put even more stress on indebted consumers.
Below, you can find everything you need to know about Federal Reserve interest rate increases. This includes the odds of a September 2022 rate hike as well as insights on what that would mean for your wallet. WalletHub also conducted a nationally representative survey to gauge public sentiment about rising rates.
Fed Rate Hike Odds & Predictions
All signs point to the Federal Reserve increasing its target rate by 50-75 basis points in September 2022. Below, you can see what the latest research and experts consulted by WalletHub say will happen.
Fed Rate Hike Probability
Source: CME Group
Fed Rate Hike Impact by Loan Type
Interest rates on financial products, from credit cards to car loans and mortgages, are generally based on some sort of benchmark rate, which in turn is influenced by the Federal Reserve’s target interest rate in one way or another. So when the Fed’s target rises, the interest rates consumers pay also go up, increasing the cost of borrowing. Unfortunately, the rates we earn on deposit accounts aren’t nearly as quick to react.
Below, you can see how Fed interest rate increases have impacted consumers’ finances in the past, as well as how much we can expect a September 2022 rate hike to cost us.
Credit Cards:
The vast majority of credit card rates are variable, tied to the Prime Rate. As a result, we expect to see credit card rates rise the same amount as the Fed’s target.
- A 75-basis point increase will cost credit card users an additional $5.3 billion this year, on top of the hikes so far this year.
- When you factor in the rate hikes from March, May, June, July and September, credit card users will wind up paying around $20.9 billion more in 2022 than they would have otherwise.
Mortgages:
We don’t expect much of a change in mortgage rates following a September rate hike, as the mortgage markets have already accounted for the move. That’s because mortgages have fixed rates that are priced with a far longer time frame in mind than other borrowing vehicles.
WalletHub’s analysts estimate that the upcoming September rate hike has increased the cost of new mortgages by around 32 basis points , which translates to roughly $30,600, assuming the average home loan of $409,100.
Auto Loans:
- WalletHub expects the average APR on a 48-month new car loan to rise by around 36 basis points in the months following the Fed’s next 75 basis point rate hike.
- For historical context, the average APR on a 48-month new car loan rose from 4.00% in November 2015 to 5.50% in February 2019. That’s a 150-basis point increase in a period characterized by 225 basis points in Fed rate hikes.
Deposit Accounts:
- WalletHub expects little, if any, change in the APYs available from most deposit accounts following the Fed’s next rate hike. Online savings accounts are the exception, as WalletHub projects a 30-basis point increase in the average APY following the Fed's September rate hike.
- Online savings account yields increased by an average of 90 basis points from December 2021 to September 2022, despite 225 basis points in Fed hikes during that period. Banks seem quick to pass higher rates to consumers on loans but are not sharing the love on the deposit front.
Interest Rate Change by Account Type (Jan. 1 to Sept. 9)
Ask The Experts: Fed Forecasting
To gain a deeper understanding of everything that makes Federal Reserve rate hikes so important, we asked the following questions to a panel of experts. You can check out their bios and responses below.
- Is now the right time for the Federal Reserve to raise its target interest rate?
- How many Fed rate hikes do you believe there will be in 2022? Why?
- Who will benefit most and least from Fed rate hikes?
- Should the war in Ukraine affect the timing of Fed rate hikes?
Ask the Experts
Emeritus Faculty, College of Social Sciences and Humanities – Northeastern University
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Professor of Economics – Bates College
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Ph.D. – Associate Dean of Business – Bentley University
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EVP & Economic Advisor (2001-2011), Federal Reserve Bank of Boston and Adjunct Professor, IBS (2012-19) and Adjunct Lecturer, Economics (2013-21), Brandeis University
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Ph.D. – Professor Emeritus of Economics – University of New Mexico
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Ph.D. – Associate Vice President, Government and Regional Relations; Professor of Economics and Director, Center for Regional Economic Analysis – Sonoma State University
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September 2022 Fed Rate Hike Survey
WalletHub conducted a nationally representative survey to see what people know about Federal Reserve interest rate increases and how they impact our wallets. The survey was conducted online from September 5 to September 9. You can find the complete results in the following infographic.
Full Details Overall
| Are you concerned about inflation right now? | |
|---|---|
| Yes | 85% |
| No | 15% |
| The Fed has increased rates by 2.25% so far this year. Has this affected your wallet? | |
| Yes | 63% |
| No | 37% |
| How do you feel about the Fed raising interest rates? | |
| Upset | 31% |
| Indifferent | 28% |
| Unprepared | 25% |
| Happy | 16% |
| Which of your monthly expenses has been most affected by inflation? | |
| Groceries | 62% |
| Gas | 32% |
| Housing | 6% |
| Do you think the government should put a cap on gas prices? | |
| Yes | 71% |
| No | 29% |
| Are you financially prepared for a recession? | |
| Yes | 56% |
| No | 44% |
| Which would you prefer: high inflation or high unemployment? | |
| High inflation | 56% |
| High unemployment | 44% |
| Is the Fed doing a good job? | |
| No | 61% |
| Yes | 39% |
| Do you think we’re heading into a recession? | |
| Yes | 79% |
| No | 21% |
Note: Percentages may not total 100% due to rounding.