WASHINGTON, D.C. (CNN) – The Federal Reserve increased interest rates when it meets Wednesday. The Fed has kept them low to support job growth and the economy.
The goal of raising interest rates is to combat inflation and lower prices for consumer goods.
The Federal Reserve has kept rates at zero since the pandemic started. That’s helped the economy by helping businesses and consumers borrow and spend money.
Economics commentator Catherine Rampell said “The housing market is incredibly critical. Shelter costs are the number one expense for most American households.”
That ability to spend has boosted demand for big-ticket items. But now, supply is struggling to keep up. Add to that rising energy costs.
New numbers show a 7.9% increase in the consumer price index year-over-year. The cost of food has risen about 8%. Energy is up almost 26%. And relief is unlikely to come soon.
Rampell said, “Almost any category you can imagine that consumers spend money on, those also went up. So, yeah, next month is going to be pretty painful.”
Inflation is so bad, some experts worry about a recession.
Senator Joe Manchin (D-WV) said, “Inflation is the one killer. It is a tax. Inflation is a tax no matter how you look at it. You got to get your financial house in order.”
The hope is that the latest 0.25-0.50 percent interest rate increase will lower the cost of living for average Americans.
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