Fed raises interest rates, hints at pullback

The Federal Reserve on Wednesday raised its short-term interest rate by three-quarters of a percent for the sixth time this year. The raise brings the interest rate up to a targeted range of 3.75 to 4 percent—its highest level since January 2008. But recently, the Fed also hinted it might slow the pace of interest rate hikes. Many economists expect that the next interest rate hike, predicted to be in December, will be half a point, rather than three-quarters of a point.

What does slowing interest rate hikes look like? Higher interest rates make it more expensive to borrow money. Decreasing the size of the interest rate hikes would mean the Fed’s policymakers think the interest rate is getting high enough to possibly slow the economy and reduce inflation. Still, the Fed said that in order to drop inflation, consumer spending and the job market both need to shrink. Both have remained stubbornly strong.

Dig deeper: Read a report in WORLD magazine by this year’s WJI students about how inflation hurts the food supply chain.