Prices on goods have been rising since the beginning of 2021. Pandemic demand, limited supply, and the war in Ukraine have made it worse. When prices rise out of control, it’s called “inflation.”
In order to control inflation, the Federal Reserve just made a huge move.
As the bank for the federal government, the Federal Reserve attempts to help the country’s economy run smoothly and serve the public’s financial interest.
When issues like inflation affect the value of the American dollar, the Federal Reserve tries to help by changing interest rates.
On Wednesday, June 15, the Federal Reserve raised the national interest rate by 75 points – the highest rate increase since 1994. Essentially, this rate hike increases rates on things like credit cards, auto loans and mortgages in order to slow down spending,
How can this possibly help?
Greg McBride, chief financial analyst at Bankrate explains how it works. “With inflation running high, they [the Federal Reserve] can raise interest rates and use that to pump the brakes on the economy in an effort to get inflation under control.”
Economists are still expecting more interest hikes throughout the rest of 2022. Meanwhile, prices are still at their highest in years. Hopefully these changes will help prices begin to trend down.