- The Fed announces the biggest interest rate hike in 22 years!
- It’s a measure to combat the highest inflation that has been registered in the United States in the last 40 years.
- How does the increase in interest rates affect you?
IS THE ECONOMY ON SHAKY GROUND? The Fed announces the biggest interest rate hike in 22 years! This is a way to combat the highest inflation that has been recorded in the United States in the last 40 years. Now, many wonder, ‘How does this affect me?’ We tell you.
On Wednesday, the United States Federal Reserve raised its interest rate range for the second time so far in 2022 and now it stands at 50 basis points, the highest since May 2000. Officials are trying to get ahead of rising inflation.
The Fed announces the biggest interest rate hike in 22 years!
Members of the Federal Reserve spent two days discussing the matter and finally reported that they would raise the fed funds rate by 50 basis points to a target range of 0.75% to 1%, a move that was approved unanimously.
At the end of March, Jerome Powell, president of the Fed, had already recognized that inflation in the United States is currently “too high” and had promised to “act quickly… to restore price stability,” according to Forbes magazine.
Taking decisive action
Top Fed officials had already signaled their intentions for a big move like this, so it didn’t come as a surprise. The goal is to get the US economy to stabilize at around 2% annual inflation, The Hill reported.
According to the price index for personal consumption expenditures (PCE) at the end of March, consumer prices stood at 6.6% per year. “The actual peak may have been in March, but we don’t know, so we’re not going to count on that,” Powell said. “We’re really going to raise rates and quickly get to levels that are more neutral.”
How does the increase in interest rates affect me?
After Federal Reserve’s decision was announced, people began to wonder: ‘How does this affect me?’ The truth is that, for example, your credit card debt is now even more expensive. With each of these interest rate increases, your variable interest rates will also go up.
This not only includes credit cards, but also student loans, car loans and mortgages with variable rates, explained CNBC. In short, consumers or buyers will end up paying thousands of dollars more in interest and fees.
Fighting to reduce inflation
This increase in interest rates is a radical action by the Federal Reserve, as its officials are betting that consumers and businesses will reduce their spending. If rates are high, people may be less interested in buying. If demand for products declines, providers of goods and services may be inclined to lower prices as well, which in turn would curb rising inflation. Although, for now, the measure will hit people’s wallets immediately.
The US Federal Reserve hopes to slow the economy enough to curb inflation, but there is still a huge risk of pushing the country into a recession and leading to rising unemployment. The Fed announces the biggest interest rate hike in 22 years!
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