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August 9, 2006

Fed Interest Rate Decison Good News for Credit Card Holders
The Federal Reserve's Open Market Committee decided to hold interest rates steady yesterday, good news for credit card holders and others with variable-interest loans. Most credit cards offer variable interest rates tied to the Fed's rate policy--when the Federal Reserve raises rates, cardholders' rates go up as well. According to the IndexCreditCards.com Credit Card Monitor, the average credit card interest rate on basic credit cards with no rewards climbed from 12.6% at the beginning of 2006 to the current 14.16%.

While the Fed held steady, it should be noted that it was a rare split vote--the final tally was 9-1, with Jeffrey M. Lacker preferring a quarter-point hike. While this seems minor on the surface, many speculate that the Committee generally falls into line to create a unanimous vote, even if there is internal disagreement. In this case, Lacker obviously wanted his disagreement on the record, which may mean that the next Fed meeting will be quite spirited. Whether that means another hike could be forthcoming or that the brakes have been set for a longer haul is, as always, anyone's guess.

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