US interest anticipates the Fed meeting and rises to historic levels

US interest anticipates the Fed meeting and rises to historic levels
US interest anticipates the Fed meeting and rises to historic levels

Today, Tuesday, in Washington, the Fed meetings that the whole world is waiting for begin, and while expectations are divided between raising 0.75% and 1%, US interest rates anticipated the meeting with a continuous rise over the past week, until the rate of return on the benchmark 10-year treasury bonds stabilized near 3.6% For the first time since April of 2011..

The Federal Reserve will not announce its decision before two o’clock tomorrow, Wednesday, Washington time, but 80% of analysts expect, as reflected by futures and futures contracts, to raise 75 basis points, while the remaining 20% ​​are waiting for a 100-point rise, to be the largest for the largest central bank in the world. In more than forty years.

In turn, the two-year bond yield continued to stabilize near the 4% rate, after reaching it in the wake of the Labor Office’s announcement, last Tuesday, of consumer price data for the month of August. The two-year bond yield has not reached this level since 2007, on the eve of the mortgage crisis, which plunged the world into a financial crisis unseen in decades..

The inversion of the yield curve on US bonds, that is, the rise in the yield of bonds of the shorter two years than the yield of the bonds of the longer ten years, caused great concern for investors, after its stability had been inverted for months, as it is seen in the financial markets as the most prominent sign of the economy approaching a recession..

Expectations of the world’s largest economy entering a recession increased with the successive hike in interest rates during the last six months, as the Federal Reserve raised the interest rate on funds by 2.25% since last March..

Bank analysts say ING That the interest rate on bank funds, which is currently in the range of 2.25% – 2.50%, may reach the range of 4% – 4.25%, if not more, by the end of the year. These rates reflect expectations of two other hikes, other than Wednesday’s expected 0.75% hike, before the end of the year, each by half a percent.

The expectations of the Dutch bank reflect the vision of the Federal Bank officials to deal with the issue of inflation to the last breath, after everyone declared it an “enemy of the people”, and the ordinary citizen endured his woes every day of the current year, at the very least..

The increase in the interest rate on the bank’s money will also be accompanied by an increase in the basic interest rate on loans, known as .Prime Ratewhich is used when lending to customers with higher credit ratings, and on which all other types of loans are priced.

After more than two years of strong rises in real estate market activity, in which house prices reached unprecedented levels, the repeated rise in US interest rates since the first quarter of this year has caused the cost of real estate loans to rise, which led to a slowdown in demand for them compared to what was previously It was the case last year.

Although mortgage loans are usually for 15 years or 30 years, the interest rate applied to them is more closely related to the yield of the 10-year Treasury bond.

The average comprehensive cost of mortgage loans for a period of thirty years rose last June to more than 6.5% for the first time since 2008, which witnessed the height of the mortgage crisis, before returning to decline under 5% during the past two months, and then to rise again to 6.25 % last week, despite being at the same time last year, was under 3.5%.

The interest rate applied to credit cards, the primary Source of funding for Americans, maintains a leading position in their concerns, as it is variable in most cases, and therefore it makes the American borrower at the direct mercy of the decisions of the Federal Reserve.

The average interest rate applied to credit cards in America has stabilized in recent weeks at the level of 18%, according to Ted Rosman, senior industry analyst at creditcard.comHowever, it will certainly witness a new rise with the expected hike on Wednesday, knowing that the current average is the highest in the history of credit cards in America..

Meanwhile, although most car loans apply a fixed interest rate to them, it is expected that the value of the new loan installments that are granted will increase, but because of the high interest rate that is applied with the increase in the basic interest rate, which is what the current borrower is protected from until Entering into a new loan.

As for student loans, the cost of loans obtained by students for the current academic year 2022-2023 has already increased before the bank’s decision, expected on Wednesday, to record an average rate of 4.99%, after it was 3.73% last year, and 2.75% the year before last..

The article is in Arabic

Tags: interest anticipates Fed meeting rises historic levels

PREV About NIS 100 billion was raised in the capital market; Bank Leumi took more than 10%
NEXT Mohamed El-Erian to investors: Prepare for worrying volatility