Federal Reserve Raises Interest Rates Another 75 bps: What It Means For You
The Federal Reserve on Wednesday approved another super-sized interest rate hike as it tries to tackle inflation, which hit another record-high in June. In a decision that was largely anticipated by market participants, including Bitcoin (BTC) dealers, the Federal Reserve on Wednesday increased interest rates by 75 basis points (bps). This marks the third consecutive 75 bps hike, a significant move designed to curb rising prices.
Why the 75 bps Hike?
The US Federal Reserve on June 15 announced a three-quarter of a percentage point or a 75 bps hike in its target interest rate, in what is being seen as a move to tame inflation. Federal Reserve Chair Jerome Powell vowed officials would crush inflation after they raised interest rates by 75 basis points for a third straight time and signaled even more large increases are likely. Experts have been seeking an end to the central banks’ continued crusade, but for now, we only have more rate hikes to contend with.
Federal Funds Rate Target Increased
The Federal Reserve raised its target interest rate by three-quarters of a percentage point to a range of 3.00%-3.25% on Wednesday and signaled more large increases are likely. At the conclusion of its two-day policy meeting on Wednesday, the Federal Open Markets Committee said it voted unanimously to raise the federal funds rate (the rate at which banks lend to each other overnight) to this new range.
A Year of Rate Hikes: From Record Lows to Aggressive Action
After holding its benchmark Federal Funds rate at record low levels throughout 2020 and 2021, in response to the economic effects of the COVID-19 pandemic, the Fed conducted its first rate hike since December of 2015 in March of 2022. The initial 25-bp hike in March was followed by a 50-bp increase in May, after price pressures showed little sign of easing.
What Does This Mean For You?
Higher interest rates impact various aspects of the economy. Expect to see increased borrowing costs for mortgages, car loans, and credit cards. The aim is to cool down demand and bring inflation under control, but it can also lead to slower economic growth. Stay informed about these changes and how they might affect your financial planning.