Federal Reserve raises interest yet again and but his time, by half a percentage point. Inflation at the moment is slowing down, but the federal government is not pausing on its rate hikes just yet.
Federal Reserve Raises Interest Yet Again
On Wednesday, the Federal Reserve announced yet another hike in the interest rates of half a percentage point thus ending the calendar year with a total of seven rate increases.
Although still substantial, this very rate hike was smaller than the previous four increases of three-quarters of a percentage point. Jerome Powell, the Fed chairman, has said consistently that the central bank would trace back its steps in its restrictive monetary policy stance once it sees major progress on inflation which of course happened this week. And although consumer prices still remain at a record high, inflation finally is showing signs of cooling thus leading the fed to decrease the intensity of the most recent rate hike.
Benefits of Raising the Federal Funds Rate Effectively
Raising the federal funds rate effectively increased the interest rates for consumers, which will then make mortgages, credit cards, personal loans, and home equity lines of credit way more expensive. On the flip side, however, these rate hikes also have boosted interest rates for high-yield saving accounts as well as certificates of deposits.
Fed’s Chairman’s Press Release in Regards to the Development
“We understand the hardship that high inflation is causing, and we are strongly committed to bringing inflation back down,” Powell cited during a Wednesday press briefing. “Restoring price stability will likely require maintaining a restrictive policy stance for some time.”