Interest Rate Hike Hopes to Combat Inflation and Lower Cost of Living

Tags: Currents Capitol, Currents, Currents News, Food, Media

Currents News Staff

The goal of raising interest rates is to combat inflation and lower prices for consumer goods. The Federal Reserve has kept rates at zero since the pandemic started. That has helped the economy by helping businesses and consumers borrow and spend money.

“The housing market is incredibly critical,” said Economics Commentator Catherine Rampell. “Shelter costs are the number one expense for most American households.”

That ability to spend has boosted demand for big-ticket items. But now supply is struggling to keep up and to add to that – rising energy costs.

“Russia’s the largest energy producer, but even before that, Jake, costs were rising, as we know, because of the Covid-19 disruptions to the supply chain,” said Economic Analyst Rana Foroohar.

New numbers show a 7.9 percent increase in the Consumer Price Index year-over-year. The cost of food has risen about 8 percent. Energy is up almost 26 percent and relief is unlikely to come soon.

“Almost any category, you can imagine that consumers spend money on — those also went up, so, yeah, next month is going to be pretty painful,” said Economics Commentator Catherine Rampell.

Inflation is so bad, some experts worry about a recession.

“Inflation is the one killer,” said West Virginia Sen. Joe Manchin. “It is a tax. Inflation is a tax no matter how you look at it. You got to get your financial house in order.”

The hope is that an interest rate increase will lower the cost of living for average Americans.

“Right now times are tough, and I’m trying to make ends meet and stuff,” said Los Angeles resident Jose Morales.

This is the first time the Federal Reserve has raised rates since 2018. Policymakers project six more similarly sized increases throughout the year.