Federal Reserve System Interest Rate Federal Funds Rate

Fed raises interest rates by 50 basis points, largest hike since 2000

What it means for you

The Federal Reserve raised interest rates by 50 basis points on Wednesday, the largest hike since 2000. The move was widely expected by economists and investors, as the Fed tries to tame inflation, which is running at a 40-year high. The increase in the federal funds rate, the Fed's benchmark interest rate, will make it more expensive for businesses and consumers to borrow money. This could lead to slower economic growth, but it is also expected to help reduce inflation. The Fed's decision comes as the economy is facing a number of challenges, including the war in Ukraine, the COVID-19 pandemic, and supply chain disruptions. The Fed is trying to balance its goals of controlling inflation and promoting economic growth.

Impact on consumers

The Fed's interest rate hike is likely to have a number of impacts on consumers. Higher interest rates will make it more expensive to borrow money for a variety of purposes, including buying a home, a car, or taking out a personal loan. For homeowners with adjustable-rate mortgages, the Fed's interest rate hike could lead to higher monthly payments. Consumers with variable-rate credit cards could also see their interest rates increase. The Fed's interest rate hike could also make it more difficult for businesses to borrow money, which could lead to higher prices for goods and services.

Impact on businesses

The Fed's interest rate hike is likely to have a number of impacts on businesses. Higher interest rates will make it more expensive for businesses to borrow money to invest in new equipment, hire new workers, or expand their operations. This could lead to slower economic growth, as businesses may be less inclined to invest in the future. The Fed's interest rate hike could also lead to higher borrowing costs for businesses that have existing debt. This could make it more difficult for businesses to repay their debt and could lead to defaults.

Impact on the economy

The Fed's interest rate hike is likely to have a number of impacts on the economy. Higher interest rates could lead to slower economic growth, as businesses and consumers may be less inclined to spend money. This could lead to a decrease in economic activity, as well as a rise in unemployment. The Fed's interest rate hike could also help to reduce inflation. Higher interest rates will make it more expensive for businesses to borrow money, which could lead to lower prices for goods and services. This could help to reduce the rate of inflation and bring it back to the Fed's target of 2%.