Fed projects two rate hikes by 2023 – how to lower your rate now

The Federal Reserve increased its outlook on inflation, and while it elected to hold rates steady for now, more rate hikes could be coming.  (iStock)

The Federal Reserve announced Wednesday it's holding the federal funds rate at the target range of 0% to 0.25% for now, but it also increased its outlook on inflation and is projecting two rate hikes by the end of 2023. 

While some economists have expressed concern about the potential of the economy overheating amid rising inflation, the Federal Reserve was less so, and announced after its June Federal Open Markets Committee (FOMC) meeting that it intends to let inflation rise in order to bring the long-term average closer to its 2% goal. 

If you're looking to take advantage of interest rates now while they remain low, contact Credible to speak with a loan expert and have all of your questions answered. 

FEDERAL RESERVE ELECTS TO HOLD INTEREST RATES AT 0%

The FOMC said it will let inflation rise for now but more members predicted a rate hike – or two – could be on the horizon. Seven of the 18 members projected there could be an interest rate increase in 2022, and just five said rates will remain the same through 2023. In fact, the Fed has now predicted two rate hikes could be necessary in 2023. 

While seven is not enough members to make any rate changes in 2022 — since a majority vote is needed to raise rates — it's likely the Fed will raise rates at least once in 2023. However, this could change as the economic recovery evolves. 

After the Fed dropped interest rates during the COVID-19 pandemic, a rush of homeowners refinanced their homes to a lower interest rate to save money on their monthly payments. While the Fed is now contemplating future rate hikes, millions of homeowners could still benefit today from refinancing their home loans since mortgage rates remain historically low. Visit Credible to see how much you could save and compare rates from multiple lenders at once. 

JANET YELLEN: INTEREST RATES MAY NEED TO RISE TO ENSURE ‘ECONOMY DOESN'T OVERHEAT’

"In their statement, the Fed noted that inflation has moved further and faster than expected, even as the job market has not yet fully recovered," said Mike Fratantoni, Mortgage Bankers Association senior vice president and chief economist. "This poses a challenge, as any move to slow inflation would at least somewhat slow the path back to full employment." 

Although the statement noted that the increase in inflation is "largely" due to transitory factors, this recognizes that some of the price increases are likely to persist for a longer period.

"While the Fed has not yet laid out specific plans with respect to tapering their Treasury and MBS purchases, the changes in their forecasts for the economy, and for their rate target, suggests that tapering is close at hand," Fratantoni said. "As a result, mortgage rates are likely primed to move at least somewhat higher."

To take advantage of mortgage rates while they remain low, visit Credible to get preapproved in minutes without affecting your credit score.

FEDERAL FUNDS RATE ABOUT TO RISE: WHEN AND HOW MORTGAGES, OTHER LOANS WILL BE IMPACTED

Other rates such as those for personal loans and student loans could also soon increase, as they are indirectly influenced by the federal funds rate, which is controlled by the Federal Reserve.

The Fed’s plan for at least the next year is to keep interest rates where they stand, but that could change if inflation takes a turn for the worse. 

At a recent virtual event hosted by The Atlantic, Treasury Secretary and former Federal Reserve Chair Janet Yellen said interest rates may need to rise to slow the rate of inflation and keep the economy from overheating. 

If you have private student loans and want to talk to a lender about refinancing while rates remain low, visit Credible to compare multiple student lenders at once.

For now, mortgage interest rates are down upon hearing the FOMC’s announcement. The 30-year fixed-rate mortgage dropped to just 2.93% for this week, according to Freddie Mac’s latest Primary Mortgage Market Survey. 

"Mortgage rates continue to drift down as markets concur with the view that inflation increases are temporary," Freddie Mac Chief Economist Sam Khater said.

Visit Credible to lock in your low rate on a mortgage refinance today, after comparing rates from multiple lenders. You can also compare rates for student loans and personal loans to save money while interest rates remain low. 

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