INSIDE INFORMATION
COMPILED BY ERIC WEILBACHER
RATE CHANGES The Federal Reserve can combat in ation by increasing interest rates or stimulate the economy by lowering them. Over the past 20 years, the rate has uctuated between 0% and 5.25%.
Peak interest rates
6%
2003 After the 2001 recession, interest rates begin to climb up as the economy recovers.
As market values have decreased over the last year, interest rate increases from the Federal Reserve System Federal Open Markets Committee have continued. Interest rate increases occurred after almost every meeting of the group for the past 14 months. HOW IS YOUR INTEREST RATE DETERMINED? When applying for a mortgage or other type of loan, the federal funds rate serves as the baseline for determining an interest rate. FEDERAL FUNDS RATE Current rate target: 5%-5.25%* What is it? This is the interest rate banks use to lend money to each other overnight. Banks are legally required to keep a certain percentage of their customers’ money on reserve, prompting banks to aim for keeping enough money on reserve without going under their limit. Why change the rate? This is used by the Federal Reserve to both control the supply of money available and keep in ation in check. As the rate goes up, it becomes more expensive to borrow money or take out a loan. *AS OF JUNE 14
5%
2022 The Federal Reserve begins ratcheting up rates in response to record in ation.
4%
2020 In response to the economic fallout of the coronavirus pandemic, rates are again slashed to e ectively zero.
3%
2008 In response to the 2008 Great Recession, interest rates are slashed.
2%
1%
0%
SOURCES: FEDERAL RESERVE, CONSUMER FINANCIAL PROTECTION BUREAU, FREDDIE MAC COMMUNITY IMPACT
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MCKINNEY EDITION • JULY 2023
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