The Federal Reserve is expected to raise interest rates at its meeting later Wednesday. Rates were previously kept low to support job growth and the economy.
From now on, the emphasis is on the fight against inflation.
The purpose of raising interest rates is to fight inflation and lower the prices of consumer goods. The Federal Reserve has kept rates at zero since the start of the pandemic.
It helped the economy by helping businesses and consumers borrow and spend money.
“The housing market is incredibly critical. Housing costs are the number one expense for most American households,” said Catherine Rampell, economics commentator.
This ability to spend has boosted demand for big-ticket items, but supply is now struggling to keep up. Add to that rising energy costs.
“Russia is the largest energy producer, but even before that, Jake, costs were rising, as we know, due to supply chain disruptions related to COVID-19,” said Rana Foroohar, CNN Global Economic Analyst.
The new figures show a 7.9% increase in the consumption index year-on-year. The cost of food has increased by approximately 8%. Energy is up nearly 26% and relief is unlikely to come soon.
“Almost every category you can imagine consumers are spending money on – those have also gone up, so yeah, next month is going to be pretty painful,” Rampell said.
Inflation is so bad that some experts worry about a recession.
“Inflation is the only killer. It’s a tax. Inflation is a tax no matter how you look at it. You need to get your financial house in order,” Senator Joe Manchin said.
The hope is that an increase in interest rates will lower the cost of living for the average American.
“Right now times are tough, and I’m trying to make things come together,” Los Angeles resident Jose Morales said.