Consumer Borrowing Costs Are Rising. Thanks, Fed!
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Your Money Briefing.
Money and market stories from the Wall Street Journal. I'm J.R. Whalen in New York. The interest rate on your mortgage, your car loan, or even your savings account is about to go higher, and you can thank the Federal Reserve. Details on that in just a moment. First, these money items you need to know. The government's antitrust lawsuit against AT&T took a day off on Wednesday because of the nor'easter that's hitting the East Coast. But the Wall Street Journal Money Beat team says the judge in the case is growing frustrated. That's because so much of the trial is expected to focus on what AT&T and its rivals think will happen if it is allowed to acquire Time Warner. Judge Richard Leon says it is, quote, a little unsettling and that this is about who's the better guesser.
He added, I guess in this case I have to get a crystal ball, maybe at one of those second-hand stores. It's crazy, unquote. Natural gas prices are depressed despite a cold winter, higher domestic demand and record volumes being sold abroad.
How will the Fed’s recent quarter-point rate hike affect consumer borrowing costs?
U.S. gas production has averaged 79.63 billion cubic feet a day this year. That's up nearly 10% from last year's record output. Turns out the season's unprecedented demand growth has barely absorbed the gas flooding the market. That's good news for the homeowners, the chemical makers, and power plants that buy gas. And the Journal's Heard on the Street team says among Facebook's growing list of new problems is a decidedly unfamiliar one. That's how to recruit and retain the best staff. Up to now, the social media giant could offer the stability of a giant corporation, as well as the prospect of working for a rapidly growing company. Its tarnished image might weaken that proposition. Heard on the streets, Dan Gallagher writes that talent is precisely what Facebook needs right now.
Among the damaging news this week reports that its chief security officer is planning to leave the company after clashing with other executives. This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. The Federal Reserve's decision on Wednesday to raise interest rates by a quarter percentage point could mean higher borrowing costs for consumers. Wall Street Journal reporter David Harrison joins us from our Washington bureau to discuss. So, David, the Fed's been raising interest rates steadily, slowly but steadily, for about two years, but consumers really haven't seen the effects up until now.
Yes, that's right. So usually what happens in these cycles, you know, in these cycles where the Fed raises its interest rate is that it takes a while, several months, years for the effect of a Fed rate increase to really, you know, ripple through into the rates that you and I pay for things like mortgages or cars or the rates that we get on our savings, you know, when we put our money into CDs over at the local bank. So It takes a little while for that to happen. That's something that, you know, it's almost by design. It's something that Fed officials are very well aware of. There's a long lag time in monetary policy. And what we're finally starting to see now is the effect of these rate increases sort of translating into ordinary everyday interest rates.
So I guess it's a sign that the recovery is really at a point now where rate increases are actually having an effect and you're going to be paying more for that loan that you get.
And part of this lag time that you speak of, part of it is also that lenders will hold back raising rates for a bit so as not to spook customers and lose business?
Yeah, that's sort of the process, how this works. When the Fed cuts, when there's a recession, obviously, you're much less likely to go out and borrow a lot of money to buy a house or a car when you say you've lost your job. So these lenders face a pretty tough business environment during recessions. So what happens then is the Fed will cut rates during recessions, encourage more people to borrow because borrowing is now cheaper, and lenders, they'll do the same.
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