The Fed Is Pausing Interest Rate Hikes Yet Again. Here's What That Means for You

The Federal Reserve has been intent on cooling inflation. The central bank has long maintained that an annual rate of 2% inflation is optimal for a stable economy. With levels surging well beyond that in 2022, the Fed had to take action by implementing interest rate hikes. And since March of 2022, it's raised its benchmark interest rate 11 times.

At its Oct. 1–Nov.1 meeting, however, the Fed opted to leave interest rates as is. And that's the second meeting in a row in which the Fed has made this decision.

A pause in interest rate hikes is generally good news for consumers. But the question remains -- is the Fed really done with rate hikes, or are more yet to come?

Consumers get a break

The Federal Reserve does not have a hand in setting consumer interest rates. So the rate you're charged for an auto loan or personal loan, for example, is set by a specific lender -- not the Fed.

The rate the Fed oversees is the federal funds rate, and it's what banks charge each other for short-term borrowing. But when that rate increases, financial institutions tend to pass the cost along to consumers in the form of higher interest rates on different products.

Now, it's important to note that the cost of consumer borrowing is generally high right now on the heels of the 11 rate hikes the Fed has implemented over roughly the past year and a half. And the fact that the Fed didn't cut rates at its last meeting means that consumers shouldn't expect much near-term relief.

However, the fact that rates didn't increase is a good thing, especially for borrowers with variable interest credit card and home equity line of credit (HELOC) balances. When rates are high, borrowers can react by holding off on signing new loans. But those who owed money on credit cards and HELOCs prior to the Fed's rate hikes have largely had to just roll with them and pay up.

Are more rate hikes in store?

The Fed is scheduled to meet once more this year, in mid-December. And that means the central bank has another opportunity to raise rates once more before the end of the year. Whether it opts to do so will hinge largely on factors like unemployment and other economic data that's released in the near term.

So what does that mean for you? For the most part, it means that if you don't need to borrow money right now, hold off. We could start to see rate cuts in 2024 if inflation cooperates. Once that happens, borrowing could become less expensive.

Meanwhile, if you owe money on a credit card or HELOC, do your best to get ahead of that balance in case rates do, in fact, go up. And if you have the ability to stick some cash into your savings account, do that, because the one silver lining in all of this is that the Fed's rate hikes have led to more generous interest rates on the part of banks. You may also want to consider locking in a longer-term certificate of deposit (CD) while rates are higher.

It's too soon to say whether the Fed is done with rate hikes. But the fact that the central bank didn't raise interest rates at its most recent meeting is certainly positive news for consumers on a whole.