Fed Hike Boosts Borrowing Costs as Mortgage Rates Hit Nearly 7%

The Federal Reserve raised its benchmark interest rate for the first time in three years to combat stubbornly high inflation, signaling another potential hike later this year. The quarter-point increase brings the Fed's key rate to about 3.9%, which could lead to higher borrowing costs for mortgages, auto loans, and credit cards. In a set of quarterly projections, the Fed also indicated its rate-setting committee may raise it to 4.1%.

Americans are already facing high costs for groceries, gas, and housing, making affordability a leading issue in the upcoming midterm elections. Homebuyers seeking relief from rising mortgage rates may be disappointed, as the weekly average rate on a 30-year fixed-rate home loan has climbed to just below 7% - its highest level in over 19 months.

Meanwhile, retail sales rose 1.2% in August after a revised 0.5% dip in July, beating economists' expectations of a 0.7% gain. Excluding business at gas stations, retail sales increased by 1.1%. The unemployment claims fell to 196,000, the fewest since mid-July.