Fed unleashes another big rate hike in bid to curb inflation

CHARLOTTE — The Federal Reserve on Wednesday raised its benchmark interest rate by a hefty three-quarters of a point for a second straight time in its most aggressive drive in three decades to tame high inflation.

The Fed’s move will raise its key rate, which affects many consumer and business loans, to a range of 2.25% to 2.5%, its highest level since 2018.

That means it costs more to borrow money. You’ll pay more on things like your credit card debt or loans for a car or home.

The central bank’s decision follows a jump in inflation to 9.1%, the fastest annual rate in 41 years, and reflects its strenuous efforts to slow price gains across the economy. By raising borrowing rates, the Fed makes it costlier to take out a mortgage or an auto or business loan. Consumers and businesses then presumably borrow and spend less, cooling the economy and slowing inflation.

The Fed is tightening credit even while the economy has begun to slow, thereby heightening the risk that its rate hikes will cause a recession later this year or next. The surge in inflation and fear of a recession have eroded consumer confidence and stirred public anxiety about the economy, which is sending frustratingly mixed signals.

It may not sound like a big bump, but it’ll have a significant impact.

For an average credit card with a balance of about $5,000, Wednesday’s hike will cost an extra $283 in interest before the bill is paid off.

Payments will also be higher for folks looking to borrow money to buy a house or car. The jump will only impact people purchasing after the rate is raised.

This is the fourth rate hike this year as U.S. economic leaders attempt to stop rising costs that are plaguing almost everything from gas to groceries.

The goal is to slow the economy down by making borrowing more expensive, which should bring down inflation.

There are signs the previous efforts are having an impact.

Walmart cut its profit, outlook citing less spending from customers. Prices for air travel are also dropping significantly and so is the cost of a gallon of gas at the pump.

Gas is nearly 60 cents cheaper in both North Carolina and South Carolina than it was a month ago.

“I think this is wonderful, this is what we’ve been looking for, a little relief in our life,” one person told Channel 9.

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On Thursday, a new report from the Biden Administration will show if the U.S. saw two quarters in a row of negative gross domestic product growth -- a standard definition of a recession.

Still, the White House has rejected that idea.

“I think the state of the economy is demonstrating resilience in the face of very significant global economic challenges,” said Brian Deese, director of the National Economic Council.

The Associated Press contributed to this report.

(WATCH BELOW: Federal student loan interest rates to increase on July 1)