The Federal Reserve took an aggressive step on Wednesday to combat soaring inflation with the announcement of another larger than usual, three-quarters of a percentage point interest rate hike. The increase comes as central banking officials face a tough balancing act: bringing down rising prices amid growing concerns of an economic downturn.
With consumer prices up more than 9% from a year ago, additional rate increases are expected through the end of the year., Fed officials projected the rate would increase to more than 3% by 2023. The committee will meet again in September, November and December. Federal Reserve Board Chairman Jerome Powell speaks during a news conference in Washington, DC, on July 27, 2022. Increases in the federal funds rate has led to higher borrowing costs for Americans. According to Greg McBride, chief financial analyst at Bankrate.com, debts with variable rates such as credit cards and home equity lines of credit will be affected the most.
The federal funds rate hike comes as several other key pieces of economic data are scheduled to be released this week. On Thursday, the Commerce Department will release its report on GDP for the second quarter of 2022, which could further show signs that the U.S. is in a recession after the measure of economic activity declined in the first quarter of the year.
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