Federal Reserve officials raised interest rates by a quarter-point on Wednesday as officials tried to balance two conflicting problems: the risk that inflation could remain rapid, and the threat that higher borrowing costs could fuel turmoil in the banking system.
Here’s what today’s rate increase means for you:
It could further squeeze banks
The failure of Silicon Valley Bank and Signature Bank earlier this month has sent shock waves through the financial system, causing trouble at other banks and prompting a sweeping response from federal regulators. Trouble in the banking sector could translate into fewer loans, which would constrain access to cash.
Inflation remains a big challenge
Inflation is high, and it is not going away quickly. Consumer prices increased by 6% in the year through February, and while annual inflation has been slowing, monthly gains have recently sped back up.
Higher credit card interest rates
Annual percentage rates for credit cards go up with Fed rate increases, and credit card debt is at a record high and more people are carrying debt month to month. Bankrate says the average credit card interest rate has reached 20.4% — the highest since their tracking began in the mid-1980s.
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