Skip to content

The Half-Point Rate Hike in Florida: All you Need to Know

There's been a steady increase in the rate of inflation globally affected by several factors, including strained relationships between economic players, covid-19 outbreak, evolving economic infrastructures, and (recently) the conflict between Russia and Ukraine. Most countries, including the US, have put various measures in place to help brace for any economic ill-health.

One of the strategies propagated by the Federal Reserve is the half-point rate hike. This strategy is meant to help discourage borrowing, i.e., spending. Alternately, it helps people get a higher return on their savings and minimizes the added risk from individuals' need to invest in stocks; this results in less demand for stocks.

This article helps you understand what the Half-Point Rate Hike means and how it affects different groups of people in the US. Read on to find in-depth analysis and advice on what you need to know about the current economic status, how you'll be affected, and what you need to do to get ahead of the curve.

An in-depth analysis

Soaring prices of products and services have strained families' expenditure across the US, forcing the Fed to take a more aggressive stance in combatting inflation by making a .5% interest rate hike. Jerome Powel, the Federal reserve's chairman, says that inflation is too high, causing lots of hardship; however, the Fed is working hard to bring it down.

Prices are rising fast for the first time in 40 years. Measurements are done by the Federal Reserve state that prices have gone up by 6.6 % since last year, which has been the fastest since 1982. Several factors affected the rising inflation, including the 2019-2022 pandemic and the conflict between Ukraine and Russia.

The central bank announced its interest rate hike in March for the first time since 2018. However, it only raised the interest rates by 25 basis points amid supply chain constraints and the uncertainty caused by the crisis in Ukraine. Excluding food and energy, the prices rose by 5.2%, slightly decreasing from February's year-to-year increase.

The rates have remained close to 0% since 2019 (the pandemic's start).

The Feds raised their rates by 50 basis points in 2000, making the half-point hike the first time they've raised their rate by over a quarter of a percentage point. Additionally, it's also the first time (since 2006) that the feds have raised rates in consecutive meetings. Simultaneously, Fed officials also announced their plans to reduce the bond portfolio from 1st June.

When speaking to reporters, Powell said there was broad support for a .5 percent increase in their next two meetings. However, he also stated that they will make such decisions during those meetings and that a .75% hike isn't what they are actively considering. Powell also states that he is more inclined to more aggressive hikes in interest rates while the Fed plans on adopting a more neutral policy.

The Fed projected a 1.9% and 2.8% median rate for 2022 and 2023. A few economists project that the US could go into recession in 2023; however, Powell says their aggressive approach could cushion the landing factoring his assumptions on the US's strong labor market. He also states that the US's households and businesses are in good financial shape.

He states that the US's economy is strong and can handle a tighter monetary policy; however, it will be challenging depending on uncontrollable circumstances and events. However, how does this translate to consumers and borrowers?

What does the federal fund rate mean to you?

As discussed above, lowering or raising the interest rates affects consumers' access to car loans, credit cards, savings, etc. The Fed is meant to help keep the nation's economy stable, and it does this by monitoring various key indicators like inflation and employment.

The Fed can lower interest rates if they think the economy is slowing. Lowering interest rates encourages consumers to spend more, invest in businesses, and hire more employees. The Fed can also increase rates if the economy grows too quickly. Raising interest rates curbs expenditure, increasing the saving rates.

The central bank sets the federal funds rate and affects the interest rates at which banks lend and borrow from each other overnight. While it's not the rates consumers pay, it still affects daily borrowing and saving rates—in short, raised interest rates mean that borrowing costs more and saving earns more, eventually.

As such, households are advised to take steps meant to stabilize their finances. For instance, they should pay their debts, i.e., credit card debt, and increase their emergency savings. This protects you from increased interest rates and any other unforeseen economic curves.

Effects of lower interest rates

Low-interest rates encourage certain types of borrowing by making them more affordable. For instance, consumers and borrowers can expect a dropping credit card rate encouraging them to spend more. Additionally, borrowers can take on new loans in vehicle loans and mortgages.

Often, the changes are slight; however, they can encourage people to spend more money and take on more loans. However, they don't have an immediate effect. Depending on the loan, some consumers can experience the effects in about a month or more. But there is one downside to low-interest rates.

Generally, falling interest rates negatively affect savings. For instance, people with savings receive far less profit for their money.

A man doing grocery shopping at supermarket and looking at bill

Effects of higher interest rates

Short-term borrowing rates are set to increase since they have a variable rate and are directly connected to the Fed's benchmark. Currently, at 16%, credit card rates are higher than any other consumer loan and could go as high as 18.5% by the end of 2022. Thus, you should expect the annual percentage rate to increase within one or two billing cycles.

Assuming you make minimum payments averaging $5525, you may incur an extra $885 over your loan's lifetime if your credit card's APR increases to 18.5%. You could call your card issuer and ask for lower rates if you carry a balance. This could help you pay off the high-interest credit cards at a lower rate.

It would be best to consider knocking down credit card debts to avoid incurring extra costs for the loan.

15 and 30-year mortgage rates are fixed. Additionally, they are tied to Treasury yields making them more long-term. As such, the half-point rate hike won't affect borrowers immediately. According to Jacob Channel, LendingTree's senior economic analyst, the half-point rate hike is currently baked into mortgage rates.

A 30-year fixed-rate mortgage's average interest rate hit 5.5%, the highest since 2009. It has gone up by 3.11%, more than two full percentage points from December. It's also possible to go closer to 6% by the end of 2022. Anyone planning to buy a home will have to pay more for the next home loan.

For instance, a $300000 fixed-rate mortgage loan paid over 30 years may cost you $1283 monthly. However, this increases by $346 monthly or $4152 yearly and $124560 over your mortgage's lifetime if you pay over 5%.

Additionally, people looking to buy cars on loan will have to make more significant payments even though they are fixed. Therefore, you should brace yourself and expect to pay more in the coming months.

How much more you'll have to pay varies depending on the benchmark. Rates for Federal Student loans are fixed, meaning most borrowers won't immediately impact the rate hike. However, borrowers who get private loans are likely to pay more interest because of the half-point since they have a variable rate tied to prime, Libor, or T-bill rates even though they are fixed.

How about savers?

Some of the biggest retail banks' savings account rates hover near rock bottom, averaging 0.06%. According to Ken Tumin,'s founder and editor, the average deposit account rates have been slow to rise nationally where brick-and-mortar banks are concerned. This trend is expected to remain.

This can be attributed to low overhead expenses and an online savings accounts rate of about 0.5%, which is much higher than the traditional brick-and-mortar bank's average rate.

For instance, people with $10000 in a regular savings account that earns 0.06% will make 6 dollars in interest in one year, while average online savings accounts that pay 0.5% interest will earn you 50 dollars with the same savings.

However, increased inflation rates make any money placed in savings lose its purchasing power. That said, choosing the correct type of savings account could make a huge difference. You'll have to ensure that money placed in savings provides a better yield because of the increased half-point rate.

The worst thing that could happen is if the increased borrowing cost doesn't let you benefit from the higher savings rate.

Summary - Discussing the good, the bad, and the ugly

While the Fed increased the federal fund rate by .5%, it also plans on selling 4.7.5 million in bonds per month, including mortgage-backed securities June through August before increasing the pace in September. While the increased rates have put pressure on the mortgage industry, the expected hike was baked into the industry, which (surprisingly) made the mortgage rates fall.

The good

As discussed, the half-point rate hike was expected. It was unanimously voted for by the FOMC (Federal Open Markets Committee). Although the Fed's chair insisted that the inflation may have peaked and that their monetary policy currently works to expectations, you should take it with a grain of salt.

The statements provided by Powell may be a strategy not to scare the market. However, the statements are encouraging, and the Dow Jones Industrial Average's points increased by 900 points. The truth is that current interest rates will lead to slower price growth in the coming months and years.

The bad

The Fed's policy is a double-edged sword for home buyers. However, the hiked rates and shrinking balance sheets will reduce the price. However, it'll still lead to high mortgage rates. Mortgage rates were meager during the Covid-19 pandemic, creating many opportunities for people looking to buy homes; however, things are currently working in reverse.

It becomes even trickier if you remember that the Fed will keep making rate hikes in the coming months. The Fed's policy is designed to cool things over time; however, this is at the expense of pricing out low-income home-buying groups. With the mortgage rates being at the 3s and 4s, we can say that we are at the point of no return.

If you keep track of the rates, you should remember that they were between 0 and 0.25 percent from March 2020 to March 2022. However, they are currently between 0.75 and 1 percent. The rates don't impact the market directly; however, they affect market activity, creating higher rates and reducing demand.

Inflation also has a double-edged sword effect in the short term regardless of the sunny days ahead. The current inflation rate, which is at 8.5%, and the chance of a good "soft landing" means that it's likely that we'll experience a high cost of living for the next few months.

The ugly

A few ugly truths that the fed let slip, including that inflation is fueled by various volatile sources making it difficult to tame. For instance, Ukraine's invasion by Russia is a massive contributor to the fact and has caused many economic and human hardships making the US's economy highly uncertain.

The invasion and other related events create more pressure on the economy, which (added to the Covid situation in china) could affect the supply chain, leading to more issues with the economy. This means that we are not out of the woods regardless of the policies adopted by the Federal Reserve.

Powel admitted in the press conference that all the Fed has are hummers; however, not everything is a nail. He admitted that they didn't have a surgical plan for fighting the current economic issues, and all they have are the balance sheet, interest rates, and forward guidance, which are a bit blunt.

The Fed uses those tools to fight inflation in ways that aren't likely to affect the market.

Effect of global events on US economy

Several factors have negatively impacted the US economy, and solving them could help make the economy more stable in a short period. For instance, cultivating better relations between Russia and Ukraine could help improve the situation.

Additionally, most economists suggest that the quickest way to improve the economy would be to cut tariffs on imported goods, reduce prices, and create more competition for local products. Doing this could help with the current inflation rates; however, this isn't the most popular sentiment in the US.


Most people express concerns about the USA's likelihood of falling into recession, and pessimists were likely validated by the news that the GDP fell within the first quarter. The USA's GDP fell at a 1.4% annualized rate, the first decline since the year 2020's second quarter. After rising by a 6.9 % annualized rate in 2021.

The decline was due to several factors like inventories and exports. Aside from said factors, the demand for US products was more substantial than in 2020's last quarter. However, 2020's last quarter had enough inventory to satisfy demand, which was done in early 2022, leading to an inventory deficit.

These factors lead the Federal reserve to believe that the US economy is still vibrant, and understandably so. However, the truth is that regardless of whether the US economy is strong, we are still treading a thin line, and there is a chance we could fall into recession.

The Federal Reserve doesn't have a clear and set plan they can implement to make the economy better, meaning that there is the chance that we could fall into recession if some other negative factors were to influence it, i.e., straining the resources.

Thus, while raising the rates could help solve the issue and keep the economy somewhat better in the short term, long-term solutions are required.


The half-point rate hike is a good short-term solution and could help people bear the effects of inflation in the short term; however, it may become an issue if a long-term solution isn't found. Thus, the Federal Reserve should look for better and more long-term solutions to inflation in the US to prevent chances of going into recession.

You could use various strategies, including making and sticking to a budget, evaluating your expenses, etc. However, you should look for other alternatives while bracing for more rate hikes as predicted by the Fed. As such, you should plan accordingly to protect yourself from falling into a financial pitfall. It would help if you also took some time to take care of your mental health.

Finally, it would be good to understand that this is the best time to focus on making more money and saving. It would help to create more opportunities and align your financial decisions accordingly.

Find The Right Mortgage

For more than 20 years, Phil have been helping customers achieve their home purchase and refinance goals by providing them with invaluable resources and support.

Schedule a FREE Consultation
Phil Ganz

Subscribe to Get Your First Time Homebuyer Checklist

Sign up for the weekly newsletter to stay up to date on the latest real estate market trends, loan news, and so much more!