Fed Hikes Key Rate Amid Rising Inflation and Mortgage Rates

The Federal Reserve raised its benchmark interest rate for the first time in three years to combat stubbornly high inflation. 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.

According to quarterly projections, the Fed's rate-setting committee may raise the key rate again to 4.1% later this year. This move comes as Americans are already struggling with high costs for groceries, gas, and housing, making affordability a major concern in the upcoming midterm elections.

The average mortgage rate on a 30-year fixed-rate home loan has been rising for months and reached nearly 7% this week, its highest level in over 19 months. This is the fourth consecutive week that mortgage rates have moved higher.