Overview
- The Federal Reserve raised its policy reference rate to 3.9% this week, a step taken to slow inflation by making short-term borrowing more costly.
- Economists say long-term interest rates are being driven by persistent inflation that has outpaced wage growth for months, not only by Fed moves.
- Large technology firms are drawing down cash and borrowing to build AI data centers, which increases competition for financing and pushes up long-term yields.
- The 10-year Treasury yield rose above 5% earlier this year and the average 30-year mortgage rate climbed to about 6.95%, squeezing home affordability for many buyers.
- Officials and analysts warn that continued uneven growth, supply constraints and large federal budget deficits could keep borrowing costs higher for the foreseeable future, affecting households and investment decisions.