Fed increases interest rates by another 75 basis points

As expected, the Federal Reserve Board hiked interest rates by 75 basis points on Wednesday for the second straight month, taking its benchmark rate to a range of 2.25%-2.5%.

The Fed’s attempt to cool down the hottest inflation in 40 years has taken its cumulative June-July increase to 150 basis points—the steepest since the US central bank began using overnight funds rate as the main tool of monetary policy in the 1990s.

No recession
The Fed says it is imperative to bring down inflation even if it means slowing the economy. He, however, rejected speculation that the US economy is in recession, citing a “strong labor market.”

Another “unusually large increase could be appropriate” at the next meeting on September 20-21, but that's a decision that will depend on data on inflation and employment between now and then, Fed Chair Jerome Powell said.

Assessment
Powell said the Fed will start to slow hikes later this year to assess the impact.

“As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation,” Powell said.

It remains to be seen if the Fed succeeds in taming inflation, but here is what this rate hike means to you.

On a $10,000 debt, every 0.25% increase in the Fed’s benchmark interest rate means an extra $25 a year in interest. So the 0.75% hike means an extra $75 of interest for every $10,000 in debt.

A 2.25%-2.5% increase means you will be shelling out between $225 to $250 on a $10,000 debt.