header

Largest Interest Rate Spike Since 1994, And More Rises Are Expected

placeholder Topic - Savings Tools

Published by GreenSprout Experts | 1/26/23

Greensprout.com is an independent, advertising supported comparison website. The products or offers that appear on this website are from third party partners and advertisers from which Greensprout.com receives compensation.

On Wednesday, June 15, 2022, the Federal Reserve announced the largest interest rate spike since 1994, hoping to slow the current rise of inflation as it puts pressure on the US economy.

The actual increase was a full three-quarters of a percentage point in the rate. This was not a surprise, as the Fed has been warning of upcoming interest rate increases in recent months.

Between domestic factors, such as rapid economic growth and the low cost of lending, and international factors, such as the war in Ukraine, many different causes have led to this increase.

Federal Reserve Chairman Jerome Powell was quoted as saying, "We thought that strong action was warranted at this meeting, and we delivered on that. It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all. … The current picture is plain to see: the labor market is extremely tight, and inflation is much too high.”

What does this mean for you?

As a result of the interest rate increase, the costs of loans, mortgages, and business investments will go up. The economic growth should slow down slightly, and consumer spending should also fall. As prices rise, demand for goods and services should also drop, usually bringing lower prices as well.

Not everyone is enthusiastic about the Fed's move, though, as some are concerned that the spike will be too much and in turn cause a wave of layoffs, and even the possibility of a recession.

If a recession does hit, we could potentially be looking at increased unemployment and less economic growth.

Powell responded, "We don’t seek to put people out of work, of course. We never think too many people are working and fewer people need to have jobs, but we also think you really cannot have the kind of labor market we want without price stability. We have to go back and establish price stability."

The Fed was very clear that it intends to enact further interest rate increases in the coming months as necessary to continue the battle against inflation.

SAVE UP TO $500 A YEAR
placeholder Save up to $500 on auto insurance
placeholder Compare rates with no obligation
placeholder Compare rates from top providers
Subscribe now to receive smart money tips and exclusive offers!
By submitting this form you agree to receive emails from GreenSprout and to the privacy policy and terms.

Latest Stories

placeholder
Published by GreenSprout Experts | Feb 05, 2023
A Simple Guide to Debt Consolidation
Being under a mountain of multiple debts can seem like an impossible obstacle to tackle. Thanks to debt consolidation, however, there are options you can use to make this battle more manageable. Read on to learn more...
placeholder
Published by GreenSprout Experts | Feb 05, 2023
6 Smart Tips for Lowering Your Monthly Bills
Life is a lot of fun, especially when you can do what you want to do. However, financial restraints often hinder us from being able to enjoy the small pleasures of life. We all know that the solution to this is to save up, but...
placeholder
Published by GreenSprout Experts | Feb 05, 2023
6 Effective Ways to Prevent Identity Theft
These days, your data and information get stored on just about every platform you log into or sign up for. Whenever we share our personal information when signing up on an online platform, whether it be a social media site like...

As Seen On

placeholder
placeholder
placeholder
placeholder