- The Fed is poised on Wednesday to raise interest rates for the sixth time this year.
- The hike will make it more expensive for consumers and businesses to borrow money.
- The central bank is boosting rates to curb inflation, which hovers near a 40-year high. But the higher rates risk pushing the economy into a recession.
The Federal Reserve is poised on Wednesday to raise interest rates for the sixth time this year. That increase will have a direct impact on consumers’ wallets, making it even more expensive for them to get a mortgage and pay off credit card debt.
The central bank is boosting rates to curb inflation, which hovers near a 40-year high. September’s consumer price index report showed that annual inflation fell slightly to 8.2% but rose by 0.4% on a monthly basis, exceeding economists’ expectations.
The Fed faces growing calls from lawmakers as well at the United Nations to stop hiking rates over concerns that it could ignite a painful recession. But it hasn’t signaled it will hit the pause button time any time soon, as it aims to bring inflation closer to its 2% target, even if it causes job losses.
For now, at least, the labor market remains strong. Job openings are plentiful and unemployment is remarkably low. But economists don’t expect that to be the case in 2023, especially if the Fed continues lifting rates at an aggressive pace. If today’s hike comes in as expected – 75 basis points – it would mark the fourth straight increase at that high level.
Follow along for our coverage of today’s crucial interest rate decision:
What time is the Fed rate hike decision?
The Fed’s decision comes out at 2 p.m. ET on Wednesday.
— Elisabeth Buchwald
Fed fund rates today
Ahead of the Fed’s upcoming rate hike, the fed fund rate ranges between 3% to 3.75%. A 75 basis point hike would push the range between 3.75% to 4%. The fed funds rate is the interest rate banks charge to lend money to one another.
— Elisabeth Buchwald
How does raising interest rates help inflation?
Rising rates increase consumer and business borrowing costs, which reduces demand for products and services broadly, leading suppliers to cut prices or stop raising them. But the immediate effect varies significantly across individual goods and services.
— Elisabeth Buchwald and Paul Davidson
Stock market today
Stocks opened lower ahead of the Fed’s decision. The Dow Jones Industrial Average was down by 0.5% while the S&P 500 and Nasdaq were down by 0.7% as of 10:30 a.m. ET.
S&P 500 performance during the past five rate hikes
In all but one of the past five Fed rate hikes, the S&P 500 closed at least 1% higher. The most recent hike, which occurred in late September, was the exception. Leading up to the decision, the index was higher but fell immediately after the Fed announced the 75-point hike. In the final trading hours, the S&P 500 seesawed between positive and negative territory multiple times.
— Jim Sergent
Fed rate hike history 2022
Here’s when the Federal Reserve hiked its short-term interest rate this year, and the amount by which it raised that rate.
- March 17: 0.25 percentage point
- May 5: 0.50 percentage point
- June 16: 0.75 percentage point
- July 28: 0.75 percentage point
- September 22: 0.75 percentage point
— Paul Davidson
What time is Powell’s press conference?
Fed Chairman Jerome Powell’s media conference will begin at 2:30 p.m. ET on Wednesday. USA TODAY economics reporter Paul Davidson will cover the event in person.
— Elisabeth Buchwald
What is inflation?:Understanding why prices rise, what causes it and who it hurts most.
What is a recession?:The economic concept explained and what happens during one.
What does it mean when the Fed raises interest rates?
When the Fed raises interest rates it becomes more expensive for banks to borrow money from one another. Banks pass on these higher rates to consumers by making it more expensive for them to get a mortgage, a loan, pay off credit card debt and more.
On the flip side, Fed rate hikes increase the interest you earn on money in a savings account.
— Orlando Mayorquin
How will stock react to the Fed?:Here’s how the stock market has moved with all 5 of the Fed interest rate increases
I Bond rates:Why I chose I Bonds to protect my sons’ inheritance from 40-year-high inflation
