The Federal Reserve increased the interest rates on Wednesday. This means it will cost more for people and businesses to borrow money. The interest rate is now 4.50% to 4.75%, the highest it’s been since 2007. The Fed did this because inflation, the amount prices are going up, has been going down. They believe that increasing interest rates will help keep inflation under control. The decision to increase rates was made by all 12 members of the Federal Open Market Committee and was unanimous. Despite the increase, inflation is still higher than the Fed’s target of 2%. The Fed also said it will continue to monitor the impact of its interest rate decisions on inflation, the economy, and financial markets.
In the past, the Fed increased interest rates quickly, but now it is slowing down. In December, the Fed increased rates by 50 basis points and at each of its four meetings from June to November, it increased rates by 75 basis points. This was the fastest pace of rate increases since the 1980s.
The Fed Chair, Jerome Powell, talked about the interest rate decision in a press conference and said that the decline in inflation has started. This made stocks go up. The Fed also mentioned that it will likely continue to increase interest rates in the future to keep inflation under control.
Recent inflation numbers have shown a decrease from the high levels seen last spring, but it’s still higher than the Fed’s target. The Fed uses two measures to keep track of inflation: the personal consumption expenditures index, which excludes food and energy prices, and the consumer price index, which also excludes food and energy prices. Both of these measures showed a decrease in the rate of increase, but still higher than the Fed’s target.
At the beginning of each year, the Fed always reaffirms its commitment to its long-term goals of stable prices, maximum employment, and moderate long-term interest rates.