11/03/2022

The Fed Just Raised Interest Rates by .75 Points

Here's how this helps inflation

It's been a difficult year for the U.S. economy. While consumer spending remains strong, and there are nearly twice as many open jobs as people looking for work, inflation is at its highest level in decades.

But the Federal Reserve, which sets the nation's monetary policy, took another step in its attempt to curb those economic strains on Wednesday by raising interest rates three-quarters of a percentage point for the fourth time this year. High rates of inflation have persisted despite the Fed's efforts so far, but officials hope the move will slow down the economy and set off a cascade that leads to lower consumer prices, which have climbed on everything from groceries to cars to rent.

“Without price stability, the economy does not work for anyone,” Jerome Powell, the Fed’s chair, said at a press conference on Wednesday. “Despite all the inflation, longer term expectations appear to remain well anchored… But that is not grounds for complacency. The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation become entrenched.”

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