How will the Fed Interest Rate Hike affect the Economy? Inflation and Recession Talk

Reasons For Rate Hikes

Mrs. B Finesse, M.S.

 

Did you know the Federal Reserve raised its interest rate by a quarter point Wednesday. This signaled another hike is at least on the table, if not likely, in the coming months amid a solid economy. The move nudged the federal funds rate of 5.25% to 5.5% which is the highest level in 22 years. 

 

The clip above shows Fed Chair Jerome Powell explaining how the Federal Reserve rate hikes will help the economy.  Click the picture to watch the video explaining why there is an interest rate increase.

 

By raising its interest rates, the Federal Reserve’s intention is to make investing and borrowing more expensive reducing the overall demand for goods, services, and labor in the economy. After Wednesday’s interest rate announcement, Powell affirmed the central bank no longer expects a recession to occur because of increases.

 

The Federal Reserve is in charge of balancing unemployment and inflation. Right now, the unemployment rate, at 3.6%, remains historically low. The Fed believes it can slow the economy to reduce inflation without causing people to lose their jobs.

 

Do you think this rate increase will help inflation or hurt the economy? Comment below your thoughts Finesse Fam.