Borrowers will feel pinch of higher Fed rate, the single biggest increase since 2000 — and more hikes are on the way
For the first time in 22 years, the Federal Reserve on Wednesday pushed up interest rates by a full half-percentage point — a significant escalation of its efforts to get control of troublingly high inflation.
It’s part of a likely yearlong campaign to cool the economy after what now looks like too much monetary stimulation during the COVID pandemic.Advertisement That’s the highest since 1981, and record numbers of consumers now say inflation is their family’s top financial problem. For some economists, the concern is that the Fed, in its ramped-up campaign to get inflation back to its 2% target, will apply the economic brakes too hard. Others worry that the Fed will back off too soon at signs of trouble, and end up not doing enough to arrest high inflation.
Investors are nervous, evidenced by the sell-off in stock markets, and some measures of consumer sentiment today are as bad as they were during the Great Recession, despite relatively healthy household balance sheets and an unemployment rate that’s near a half-century low. The Dow rose upon the release of the Fed statement, as did the S&P 500 stock index, which fell 8.8% in the month of April, even as market participants awaited the news conference later in the afternoon with Fed Chair Jerome H. Powell.
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