The Federal Reserve raised interest rates to help combat higher inflation rates and slow consumer spending

The FOMC raised its policy rate by three quarters of a percentage point

Columbia, SC (WOLO)  — The Federal Reserve raised interest rates today to help combat higher inflation rates and slow consumer spending.

Chair of the Federal Reserve, Jerome Powell, announced today that the Federal Open Market Committee (FOMC) raised its policy rate by three quarters of a percentage point.

“I guess the first thing I would say to every household is that we know inflation is too high and we understand how painful it is. Particularly for people who are living paycheck to paycheck and spend most of that paycheck on necessities such as food and gas and heating their homes and clothing and things like that. We do understand that those people suffer the most,” said Powell.

According to Dr. Bill Hauk Jr., Associate Professor of Economics  at the University of South Carolina, when interest rates rise, consumers can expect the interest rates they pay on different types of consumer loans like credit cards, auto loans, and some private student loans to increase as well.

“What the federal reserve is trying to do is it’s trying to slow consumer spending. What we’re seeing with these very high inflation rates is a lot of money, maybe chasing not enough goods. And so what’s happening is that the federal reserve by trying to raise interest rates will keep consumers hopefully maybe not spending quite as much and saving  a little more as a result,” said Dr. Hauk, Jr.

But Dr. Hauk says if the Federal Reserve raises interest rates too fast and consumer spending comes down too quickly, that could push the economy into a recession. Experts say that while the U.S. has had two consecutive quarters of negative GDP growth, which is typically how a recession is defined, we aren’t in a recession just yet.

Dr. Hauk explained by saying, “But at the same time you saw very low unemployment rates which is not something you’d associate with a recession. You still have very strong consumer spending which is not something you’d associate with a recession.”

During the press conference this morning, Powell said that the Federal Reserve has an obligation to provide price stability to the American people and they intend to use their tools to accomplish that.

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