The Federal Reserve Raises the Interest Rate Again
The Fed has raised interest rates again, but a full percentage point raise would complicate the explanation of its policy strategy. Fortunately, it chose not to go that route. It is speculated that a half-point hike could signal that the central bank is prepared to maintain its historically aggressive pace of increases while easing up on some of its aggressive policy measures. What was decided was a 0.75-point move, which initially has sparked a reaction from investors and market participants.
The latest hike could make borrowing money cost more, and that can eat into consumer spending power. But while a 0.75 percent increase may not seem like much, it is likely to mean an extra two hundred dollars per $10,000 of debt. Some economists expect the Fed to continue raising rates throughout the year. In fact, some analysts expect the rate to rise two more times at 0.5-percent hikes in September and November.
With inflation on the rise, the Federal Reserve is aiming to contain rising prices and ensure economic stability. However, it must do so without causing a recession. So, the interest rates rise of 0.75 percent today was no surprise. That amount is the highest increase since 1994. It would also signal that the next hike could be similar in size to this one. But investors should consider the risks associated with the policy, as the Federal Reserve has no intention of lowering interest rates anytime soon as it works to get inflation under control.
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