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Fed announcement leaves credit card APRs unchanged

Jeremy Simon

You’ll frequently find me weighing in after a Federal Reserve announcement on monetary policy, letting you know the Fed’s decision could mean lower credit card APRs for certain borrowers.

Not this time.

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This afternoon, the Fed announced that it was leaving interest rates unchanged for the first time since last summer. The decision followed seven straight rate cuts that lowered the Fed funds rate to 2 percent from 5.25 percent back in September 2007, as the central bank worked to keep a troubled U.S. economy afloat.

That decision should mean annual percentage rates on most credit cards stay as is: The majority of consumers hold variable-rate credit cards, which have interest rates tied to the prime rate. No change to prime means banks can leave APRs alone.

In their latest meeting, Fed officials voted 9-1 to keep interest rates unchanged, but acknowledged that inflation has become a bigger concern. “Upside risks to inflation and inflation expectations have increased,” the Fed said in its accompanying statement — just in case you somehow missed the prices during your last trip to the gas station. The one dissenter was Richard W. Fisher, president of the Dallas Fed, who wanted a rate increase.

With no change to interest rates, attention has turned to what may happen the next time the Fed meets. That decision will likely come down to whether the economy is at greater risk from recession or from soaring costs, with a lowering of rates used to encourage growth and an increase in rates used to dampen inflation.

Based on the language in its statement today, any change to monetary policy at the central bank’s Aug. 5 meeting remains uncertain. “The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability,” the Fed said, avoiding wording that gave a clear indication of what lies ahead.

Credit card users and market watchers will be waiting.

See related: (Previous Fed coverage) Fed cuts rates; will your credit card bill fall, too?, Is this a recession? It quacks like one, says new Fed paper

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