The Federal Reserve raised its benchmark interest rate 3/4 of a percentage point in an effort to regain control over soaring consumer prices. This was the largest increase in nearly 30 years.
“Today, the Federal Open Market Committee raised its policy interest rate by 3/4 of a percentage point and anticipates that ongoing increases in that rate will be appropriate,” Federal Reserve Chairman Jerome Powell said.
These rate hikes will affect millions of American households and businesses, pushing up the cost of borrowing for homes, cars and other loans to force a slowdown in the economy. But the Federal Reserve says it is raising rates in the hope of tamping down consumer demand, which has overwhelmed supply and driven prices way up.
“For people who are first-time homebuyers looking to get that mortgage right now, that’s going to become much more difficult than it would have, a few months ago,” said David Wilcox, a nonresident senior fellow at the Peterson Institute from International Economics. “People who are in the market to purchase a car are going to have higher borrowing rates today than they did three months ago,” he said.
Former Chair of the Federal Reserve Ben Bernanke is hoping for an economic sweet spot. “I think the Fed has a reasonable chance, a decent chance, of achieving what Jerome Powell calls a ‘softish landing’ – either no recession or a very mild recession to bring inflation down,” he said.
Even though the Fed has raised rates multiple times this year, financial experts say consumers should prepare for even higher rates in coming months.