The Fed Hasn't Hiked Yet. Your Card Rate Didn't Wait.

Fed Chair Kevin Warsh went to Jackson Hole in late August and told the room that inflation is running above the 2% target and that the central bank's predominant focus should be on prices. Traders heard the word "prices" and immediately repriced. Odds of a September rate increase went from roughly a third to better than even. Somewhere in America, a cardholder read the headline and worried about what it would do to their balance. The honest answer is almost nothing, because that damage is already done.

Sponsored by TradeSmith

Use this AI breakthrough for the chance to make 1,000%

Dear Reader,

I've bet $17 million on AI.

It sounds crazy, but it's true.

I've invested millions of dollars building, testing and perfecting some of the most advanced AI systems in the financial world. I used a model built inside Google and even hired a former NSA codebreaker.

And right now all the signals I'm seeing are pointing in the same direction:

Our new form of AI could help you 10x your money – if you move before August 31st.

Fair warning:

When I demo our system for you, you may come to see a lot of your money is invested in all the wrong stocks.

In fact, I'm publicly warning folks that the biggest AI profits won't come from buying and holding big tech names like Nvidia or SpaceX.

Instead, there's a BETTER place for your money right now.

Put simply, I want to show you the very best way to actually use AI to make money in this market.

Which is why I've arranged a free demo for you today.

Best,

Keith Kaplan
CEO, Tradesmith

P.S. You can use our new breakthrough on virtually any stock in the market. Type any ticker in you like HERE and you'll instantly have information to help you decide exactly whether you should buy or sell it.

This ad is sent on behalf of TradeSmith at 1125 N. Charles Street, Baltimore, Maryland 21201. If you’re not interested in this opportunity, please click here.

What the Chair Actually Said

Warsh acknowledged that the labor market is holding up, that business investment is solid, and that consumers are still spending. Then he pointed at the inflation numbers. Consumer prices were up 3.4% over the twelve months through July. The Fed's preferred gauge was running at 3.7%. His phrase was that the Fed has work to do.

He also declined to give any guidance on the path from here, arguing that a quieter central bank, more purposeful in its communications, does its job better. That is a real shift from the last decade of Fed practice, and it means markets will get less warning before moves.

The Rate That Already Moved

The average credit card APR is currently sitting near 24.93%. The Fed's own survey of accounts actually carrying a balance puts the effective rate around 22.15%. Both figures are within a whisker of the highest levels ever recorded, and both got there over the past three years while the Fed was hiking and then holding.

Here is what most people miss. Card rates are floating instruments tied to the prime rate, which moves with the Fed. But issuers widened their margins over prime substantially during the last cycle and never gave that spread back. So when the Fed held rates steady, card rates stayed at the peak. A quarter point hike would add a few dollars a year to a typical balance. The 24% you are already paying is the actual story.

The Balances Are Still Growing

Americans owed $1.26 trillion on credit cards at the end of the second quarter, up $21 billion in three months. Total household debt was $18.8 trillion, which actually ticked down slightly, and overall delinquency improved a bit to 4.7% of outstanding balances. Auto loans are the soft spot, with serious delinquencies running at 3.00%, up modestly from a year ago.

That is not a crisis picture. It is a picture of households absorbing high borrowing costs without much relief in sight, because the relief was never going to come from the Fed in the first place.

Final Take

A September hike would be a headline. It would not be the thing that changed your finances, because the expensive part of your balance sheet repriced a long time ago and has been sitting there ever since.

What does move the needle is the spread between what you are paying and what is available. A balance transfer offer, a credit union card, or a personal loan at half your current rate is worth more than any Fed decision this year. The gap between 24% and 12% on a five figure balance is real money every month.

The Fed is arguing about a quarter point. Your card is charging you twenty four percent either way.

Written by Deniss Slinkins
Millionaire Core