The Federal Reserve raised interest rates this week, the third time this year. The move is aimed at slowing inflation, which has been running too high and creating problems for consumers, businesses and the economy.
As the Fed raises rates, it affects lenders and creditors — including you if you carry credit card debt or other variable rate debt. The higher interest rates make it more expensive to borrow, which may cause consumers and businesses to cut back on spending, reducing the overall economy. This is a goal of the Federal Reserve, but it’s also a balancing act that can bring on a recession, too.
In addition, the rising rates impact your savings accounts, money market accounts and certificates of deposit (CD). The higher rates mean you earn more if you have your money in those accounts, which is a good thing.
Consumers who have a lot of debt will find it harder to pay off their balances when the Fed increases rates. They can try to refinance to a fixed-rate loan, like a SoFi mortgage, so they can lock in a low rate that won’t rise as the Fed raises rates.
In addition, the Fed’s monetary policy can have far-reaching impacts on global economies and markets. We spoke with two scholars who study how global economic and financial systems respond to U.S. Fed policy to find out what this latest rate hike could mean for you and the rest of the world.