Yesterday, the Federal Reserve announced a third-straight three-quarter-point interest rate hike, aimed at reducing persistently high inflation. The aggressive hike takes the central bank’s benchmark lending rate to a new target range of 3% to 3.25%, the highest it’s been since the global financial crisis in 2008.
Typically, rate increases come in 0.25% increments, but the Federal Reserve has been using suppressed hikes to curb the rate of inflation, which is currently up 8.3% year over year. By increasing its key interest rate, the central bank aims to discourage spending, which can reduce inflation for the prices of goods and services.
The downside is the policy change will likely cause economic hardship for millions of American businesses and households by increasing the cost of borrowing for things like homes, cars and credit cards.
In a press conference following the central bank’s policy announcement, Jerome Powell said, “No one knows whether this process will lead to a recession or, if so, how significant that recession would be.”
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