OAN’s Brooke Mallory
6:34 PM – Wednesday, July 26, 2023
The Federal Reserve has raised interest rates to a 22-year high on Wednesday, following a brief break in rises during the central bank’s attempts to keep unprecedented inflation under control.
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The Federal Reserve had raised its benchmark interest rate range from 0.25% to 5.25% then again to 5.5%. The raise is reportedly the Fed’s 11th interest rate increase since March 2022 which a dizzying rise from near-zero interest rates at the start of last year.
The rate rise was backed by all 11 voting members of the Federal Open Market Committee (FOMC), the panel of Fed officials entrusted with overseeing monetary policy.
Interest rates are one of the Fed’s most powerful tools for combating excessive inflation, which has been pinching households for the past two years.
Inflation soared to 9.1% per year in June, a 40-year record that fueled worries of a recession.
According to consumer pricing statistics provided by the Department of Labor last month, price growth has subsequently slowed to 3% year after year.
While this is technically considered a significant improvement, Federal Reserve officials remain hesitant about slowing rate rises until inflation is closer to the bank’s 2% annual objective.
Fed policymakers unanimously opted to pause in June, although many members privately signaled support for raising rates last month. The economy is also growing and adding jobs at a much slower rate than before the Fed began raising interest rates.
While 0.25% may not seem like much, incremental rate increases reportedly could have a significant impact on the economy and for Americans’ wallets.
Savings account rates are comparable to the cost of carrying credit card debt, and interest rate increases raise the cost of borrowing in an effort to restrain inflationary expenditure.
In June, almost three-quarters of the 52 business economists polled by the National Association for Business Economics (NABE) predicted a recession within the following 12 months. This is a considerable decrease from the April NABE survey’s 50-50 split.
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