Wednesday’s announcement that the Federal Reserve was lifting the Federal funds interest rate for the first time since it went to 0% could have huge effects for the economy.
One of the most immediate impacts is on banks.
Most simply, the Fed Funds rate determines the interest rate at which banks borrow money short-term.
This increase is then passed on to other borrowers, mostly consumers, through higher rates on things like credit card debt.
And this debt is based of the banks’ prime loan rate, the interest rate used as a starting point for non-mortgage loans.
The announcement of the Federal Reserve to raise the Fed funds rate 0.25% had an immediate impact on these rates, sending rates across the board to 3.50% from 3.25%, mirroring the Fed’s increase.
And so in the wake of what seemed like an arcane and abstract policy change from the Fed on Wednesday, this is the impact that might matter to someone who doesn’t follow the news as closely as their credit card bill.
Here’s the quick rundown of the prime loan rate changes — all taken to 3.5% from 3.25% — announced at major US banks so far:
- Wells Fargo
- Bank of America
- M&T Bank
- PNC Bank
- US Bank