What the latest Fed rate hike means for the economy


A free daily digest of the biggest news stories of the day - and the best features from our website
Thank you for signing up to TheWeek. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.
The Federal Reserve has announced that it will raise interest rates another 0.5 percent to 4.5 percent, marking the seventh increase of 2022. This will, however, be the smallest of the last four rate hikes showing promise that the increases will slow soon.
The increase comes following the latest consumer price index report showing that inflation cooled in November. Along with the rate increase, the Fed also announced economic predictions indicating that rates will likely need to go higher to slow the economy even more, writes The New York Times. It currently predicts rates will rise to 5.1 percent by the end of next year. Unemployment is likely to increase as well.
However, despite the consistent rate hikes, the economy has stayed strong, especially the job market, which some experts predict will reach a dead end at some point. "The cumulative impact of higher rates are just beginning. Hence, the Fed has to step down its pace a bit," said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
There is concern that the hikes will cause a recession in the coming year with the rates already heavily damaging the housing markets, a key cause of inflation. "Rate cuts may be too late. Recession risks are still relatively high," commented Keith Lerner, co-chief investment officer at Truist Advisory Services, adding that "A pivot or pause is not a cure-all for this market."
Even though it's smaller, a rate increase is still an increase and people may see higher rates on mortgages, credit cards, auto loans, and student loans. In a statement, the Fed wrote that it is, "strongly committed to returning inflation to its 2 percent objective."
Continue reading for free
We hope you're enjoying The Week's refreshingly open-minded journalism.
Subscribed to The Week? Register your account with the same email as your subscription.
Sign up to our 10 Things You Need to Know Today newsletter
A free daily digest of the biggest news stories of the day - and the best features from our website
Devika Rao is a staff writer for The Week. She graduated from Cornell University with a degree in Environment and Sustainability and a minor in Climate Change. Previously, she worked as a Policy and Advocacy associate in the nonprofit space advocating for environmental action from the business perspective. She is passionate about the environment, books, and music.
-
5 tips to save on heating bills
The Explainer Follow these expert recommendations for a cozy and cheap winter
By Becca Stanek Published
-
Should you fire your financial adviser? 4 signs it's time to say goodbye.
The Explainer Breakups are never fun, but you have to protect your wallet
By Becca Stanek Published
-
The daily gossip: Man arrested in connection with shooting of Tupac Shakur, an OceanGate movie is in the works, and more
Feature The daily gossip: September 29, 2023
By Brendan Morrow Published
-
How to ask for a pay rise to combat inflation
feature Wage growth has overtaken inflation so the chances of getting more money may soon start to recede
By Marc Shoffman Last updated
-
5 tips when retiring amid market volatility
feature In a turbulent market, diversification becomes especially important
By Becca Stanek Published
-
What are greedflation and wageflation?
feature Just when you thought you'd wrapped your head around inflation, two more terms enter the economic lexicon
By Becca Stanek Published
-
What's the best warehouse club membership?
feature Comparing Costco, Sam's Club, and BJ's
By Becca Stanek Published
-
How to beat broadband and mobile phone price rises
feature Millions of broadband and mobile customers are facing hikes of up to 17.3% from next week
By Marc Shoffman Published
-
Is another US interest rate increase looming?
feature Rate hikes resumed after a brief hiatus. What's next?
By Becca Stanek Last updated
-
Life insurance: how much cover do you need?
feature Ensure loved ones have financial protection without paying over the odds
By Marc Shoffman Published
-
IRS flummoxed by state rebate rules
feature And more of the week's best financial insight
By The Week Staff Published