Today is the big day we've all been waiting for: the day the Federal Reserve decides if it will hike interest rates, and by how much. I know this isn't something that many folks would have bothered paying attention to in the past, but with rising inflation impacting our wallets and a potential recession looming over us, we've all become Fed watchers.
So here are some FAQs to break down what exactly we can expect today.
Will the Fed raise rates? By how much?
I would be surprised if the Fed didn't—the Fed is keen to fight inflation. Markets right now think a hike of 75 basis points is most likely. The hike will increase the target range for the fed funds rate which is currently at 150-175 basis points. The fed funds rate is the rate at which banks borrow from each other, and has an indirect impact on interest rates that you may face.
What will that mean for me afterwards?
You'll notice the cost of loans getting more expensive. So say hello to higher interest rates on mortgages, car loans, and credit cards. But inflation should also come down eventually, so trips to buy groceries and clothes might not cost us so much later on.
Will this make a recession more likely?
Yes. The Fed is essentially slamming the brakes on the economy with these rate hikes. The more they raise rates, the harder it gets for businesses and people to borrow money, which slows down economic growth. With that, it becomes more likely that we might have to face a recession.
When will the decision come through?
2 p.m. Eastern. A press conference will follow, and investors will pay close attention to what Fed Chair Jerome Powell says.
Stocks are on the rise this morning ahead of the decision, and might rally afterward if it's in line with expectations, but they could still turn sour when investors grapple with the possibility of an economic downturn.
- Kristin
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