Fed Hikes Rate Amid Soaring Inflation Concerns

The Federal Reserve raised its benchmark interest rate for the first time in three years to quell stubbornly high inflation. The quarter-point increase brings the Fed's key rate to about 3.9%, which could result in higher borrowing costs for mortgages, auto loans, and credit cards.

In a set of quarterly projections, the Fed signaled its rate-setting committee could raise it a second time to 4.1% later this year. The move comes as Americans are already struggling with high costs for groceries, gas, and housing, making affordability a leading concern in the upcoming midterm elections.

The average rate on a 30-year fixed-rate home loan has been rising for months and climbed to just below 7%, its highest level in over 19 months. One year ago, the average rate was 6.26%. This is the fourth week in a row that mortgage rates have moved higher.