When the Federal Reserve raises its benchmark interest rate, everything else in the economy that involves interest rates of some kind is affected – and that’s most things. Which means the stakes are high when the Fed raises rates, as it did on Wednesday.
With inflation still sky-high, the Federal Reserve announced Wednesday it would raise interest rates by 0.75%, the largest increase since the 1990s. Photo by Spencer Platt/Getty Images)But what does that actually mean for hundreds of millions of Americans — Americans who have jobs, who buy things, who have bank accounts?
And the Fed will continue to raise rates as needed throughout the year if inflation doesn’t abate, Powell said. Its next meeting will be in late July. Ever since the pandemic began and the Fed dropped interest rates, the average interest rate for a typical savings account hovered around 0.06%,Now, with the Fed’s benchmark rate rising, interest rates are ticking up, too. Some banks, especially internet banks, are starting to offer interest rates on savings accounts of 1% or more.
But for people who need savings to be accessible without the risk of a stock market drop – like emergency funds or a down payment for a new home or car – 1% is better than nothing., are also offering higher returns than in past years.Losers, most likely: All of us, in the short-term Economists have grown increasingly pessimistic about the Fed’s ability to pull off the so-called “soft landing.”
“I do think it’s possible,” Powell said Wednesday, emphasizing how strong the economy and labor market currently are.
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