Federal Reserve Raises Interest Rate to Fight Inflation
In an effort to reduce the highest inflation in four decades, the Federal Reserve has once again raised the U.S. interest rate.
The central bank voted Wednesday to raise interest rates by another 0.75 percentage points.
"It reflects their (Federal Reserve) concern regarding the high inflation rate that we've been seeing," said Penn State Behrend Economics Professor Dr. Kenneth Louie. "The Fed is trying to be very assertive in gaining control and helping to bring the inflation rate down."
The higher interest rate mean consumers will pay more on credit cards and loans.
"Consumers are going to feel it on the financial side, because if they use credit cards or if they buy things on credit, they'll pay those higher interest rates," said Dr. Louie. "All kinds of loans, from mortgage loans for housing, to automobile loans for people who are buying cars, credit card interest rates, anybody who takes out credit, who takes out a loan for whatever reason will ultimately feel the pinch."
Higher rates raise the cost for businesses and consumers and tend to slow down the economy.
According to Dr. Louie, the rate increase comes with some risks.
"The major risk is that the Fed may inadvertently slow down the economy so much that it brings us into a recession," said Dr. Louie. "That's the greatest fear, that the Fed is trying to avoid inducing a recession by slowing down inflation, but unfortunately sometimes it slams on too much and it tips the economy into recession."
This is the fourth time this year the Federal Reserve has raised the U.S. interest rate.
This story is supported by the Economic Hardship Reporting Project.