Fed Hike key Interest Rate. Its Impact, Inflation And Economy

(CTN News) – There has been another outsized Fed hike in interest rates this month. Federal Reserve officials raised their short-term interest rate by three-quarters of a percentage point for the second straight month.

A range of 2.25% to 2.5% is the range this report finds the federal funds rate, which is what banks charge each other for overnight loans.

This is close to the Federal Reserve’s long-term, or neutral, interest rate of 2.5%. That’s the interest rate intended neither to stimulate nor to curb economic growth.

According to Federal Reserve Chair Powell, the central bank must “move expeditiously” toward that neutral level and then likely beyond it in order to cool the economy and bring inflation under control.

What is the Fed’s plan for the rest of the year regarding its stock-market-dampening rate increases?

Powell said the Fed might do another unusually large increase, but it hasn’t been decided yet.

Why do Fed hikes occur? Inflation is slowed by those hikes, but how?

Your questions answered: We answer your top financial questions ahead of the next Fed rate hike this week.

How long will the Fed hike rates?

The economy is in an “extraordinary challenging and uncertain time,” Powell said. He believes the economy has not felt the full impact of the recent hikes due to their size and speed.

The impact of  Fed hike 

It is expected that Wednesday’s rise will ripple throughout the economy, causing credit card and home equity rates to rise sharply.

Rates for fixed 30-year mortgages have jumped up to an average of 5.54% from 3.22% at the beginning of the year, according to CoreLogic.

After years of meager returns on bank savings accounts, households, especially those of elderly individuals, are finally enjoying higher rates of return on their savings accounts.

What are the effects of Fed Hike interest rates on inflation?

According to the consumer price index (CPI), annual inflation hit a new 40-year high of 9.1% in June, forcing the Fed to approve another three-quarters point move.

Also, U.S. employers added 372,000 jobs last month, highlighting a still-vibrant labor market despite Fed hikes aimed at tempering the gains to soften wage growth.

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