February 02, 2023 (MLN): The US Federal Reserve on Wednesday raised the policy rate by 25 basis points, bringing the rate to a range of 4.5% to 4.75%, the highest since 2007.
The hike will result in increased monthly payments on mortgages, credit cards, auto financing, and loans, as CNBC reported.
The chief financial analyst at Bankrate, Greg McBride said that although a single hike may not have a significant impact, the cumulative effect of the recent series of rate increases is starting to become clear to households.
The credit card interest rates have hit record highs and that the rise in mortgage rates has affected the housing market, which has gone from being "red hot" to "ice cold" in a short amount of time, he added.
The interest rate hikes are meant to curb inflation by making borrowing more expensive, but they also slow down economic growth, which could lead to a recession.
A recent poll of economists shows that there is a 61% chance of a recession in 2023.
Despite the recent drop in inflation, which has gone from 9.1% to 6.5% year-over-year, Federal Reserve Chair Jerome Powell has stated that he is committed to keeping interest rates elevated until inflation is further controlled, as it is still well below the Fed's target of 2%.
