Fed rate hike will likely push borrowing costs on credit cards, mortgages

The Federal Reserve increased the cost of money by a quarter-point on Wednesday, marking the first rate hike since the summer of 2023. This move, aimed at curbing inflation, is likely to make borrowing for homes, autos and other purchases more expensive. However, savers can expect to earn a bit more interest on their savings. The Fed's target interest rate now stands at a range of 3.75 percent to 4.00 percent.

Inflation, which has remained above the Fed's 2 percent target for over five years, is the primary reason for this rate increase. In August, consumer prices rose by 3.4 percent compared to a year earlier, with the monthly increase quadrupling from July to reach 0.4 percent. The aim is to slow consumer and business spending by raising borrowing costs, thereby reducing demand for goods and services and cooling the economy to reduce upward pressure on prices.