July 27, 2022
“… these rate hikes have been large, and they’ve come quickly, and it’s likely that their full effect has not been felt by the economy.”Federal Reserve Chairman Powell on raising a key borrowing rate which will make it more expensive for both businesses and individuals to borrow money.
- The Central Bank once again raised the federal funds rate by 0.75 percentage point (the difference from an old percent rate to a new one); this raises the current borrowing rate to the range of 2.25%-2.5%.
- Why It Matters: This federal funds rate helps set other borrowing rates, such as the interest rates for credit cards or car loans.
- The Federal Reserve is attempting to counter inflation (an overheating economy) by slowing demand. The challenge is to raise interest rates so much it slows the economy (though perhaps tipping it into recession).
by Jenna Lee,