Why does the Fed raise interest rates? And how do those hikes slow inflation?

Orlando Mayorquin | USA TODAY | Jul 25th, 2022
Category: Education

  • Higher interest rates make borrowing and spending across the economy more difficult, cooling demand
  • The Fed is expected to raise rates three more times in 2022
  • The next Fed hike will come by July 27

As Americans brave 40-year high inflation, the Federal Reserve is continuing its efforts to rein in prices by jacking up interest rates.

The release of the Consumer Price Index this month revealed that inflation rose 9.1% in June compared with the same time last year, marking the largest increase since November 1981. 

The Fed in June raised interest rates by 0.75 of a percentage point to a range of 1.5% to 1.75%, the biggest hike since 1994, USA TODAY reported. More hikes are likely, with the next one expected on Wednesday.

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