Fed's First Rate Hike Since 2023
The Federal Reserve raised its benchmark interest rate on Wednesday for the first time since 2023, a quarter-point increase that brings the key rate to about 3.9%. The central bank indicated that its rate-setting committee could raise it again later this year, to 4.1%, according to quarterly projections. Over time, the move could translate into higher borrowing costs for mortgages, auto loans and credit cards.[S1][S2]
The decision comes as Americans already face elevated prices for groceries, gas and housing. Affordability has become a leading theme in the upcoming midterm elections, which are just seven weeks away. The Fed's action is aimed at quelling stubbornly high inflation, but it also risks adding pressure to household budgets that are already stretched.[S2]
Mortgage Rates Climb to 19-Month High
The average rate on a 30-year fixed-rate mortgage rose to 6.95% this week from 6.76% a week earlier, mortgage buyer Freddie Mac said Thursday. That is the highest level in more than 19 months, and the fourth consecutive weekly increase. A year ago, the same rate averaged 6.26%. The last time it was this high was Jan. 30, 2025.[S1][S2]
Borrowing costs for 15-year fixed-rate mortgages, often used by homeowners refinancing, also moved higher. That average rate increased to 6.26% from 6.09% the previous week, compared with 5.41% a year earlier. Home shoppers hoping for relief from rising rates may have to wait, as the weekly average has been climbing for months.[S1][S2]
Retail Sales Rebound, Jobless Claims Fall
American shoppers opened their wallets more than analysts anticipated in August, rebounding from a steep drop-off the previous month. Commerce Department figures released Wednesday showed retail sales climbing 1.2% last month, reversing a downwardly revised 0.5% slide in July. FactSet-polled economists had projected a 0.7% increase. Leaving out gasoline stations, purchases advanced 1.1% in August, and the numbers are not adjusted to account for inflation.[S1][S2]
Apparel and accessory retailers posted a 0.7% gain, furniture and home furnishings stores notched a 0.9% rise, and internet sellers recorded a 2.6% jump. July's pullback stood out precisely because households showed scant evidence of wearing down: they opened their wallets widely around the World Cup and Amazon Prime Day promotions, coming on the heels of brisk store traffic in April and May when they tapped government tax refunds.[S1][S2]
New filings for unemployment benefits tumbled last week, offering fresh evidence that employers are still holding onto workers. Initial claims slid to 196,000, the lowest reading since mid-July, from 206,000 a week earlier, the Labor Department said Thursday. The four-week moving average, which irons out weekly swings, eased to 203,250. FactSet-surveyed economists had penciled in 207,500. Over the past twelve months, claims have largely hovered in a historically low band between 200,000 and 230,000 per week.[S2]
Markets Wobble as Oil Swings
Stocks on Wall Street had trouble locking in gains, wrapping up a week of choppy trading. The S&P 500 ended the last session essentially flat, the Dow Jones Industrial Average finished lower, and the Nasdaq composite only narrowly held above water.[S1][S2]
Oil prices swung sharply. Brent crude, the international standard, reached nearly $110 a barrel early in the week, up from a little over $70 in July. It briefly dropped below $102 overnight before recovering much of that loss to $104.07, but crude still pointed lower for the week.[S2]
