The Federal Reserve announced Wednesday a .25% point increase in interest rates, marking the smallest rate hike since it began its fight against inflation. This decision reflects the Fed's caution regarding recent banking turmoil and signals interest rate hikes may soon come to an end.
"As a result, we no longer state that ongoing rate increases will be appropriate to control inflation; instead, we anticipate some additional policies may be appropriate," Jerome Power, the Chair of the Federal Reserve, said.
Inflation has been on a downward trend, falling from its high of 9% last year to 6% this February, but prices are still high.
However, Greg McBride, Bankrate Chief Financial Analyst, says the fight against inflation is far from over, with the goal of ultimately reaching a 2%. The job market, on the other hand, has been performing robustly with more than 300,000 jobs added to the economy in February.
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According to McBride, the Federal Reserve has raised interest rates at the fastest pace in 40 years over the last 12 months.
McBride says higher interest rates need to temper demand and slow the economy enough to bring inflation under control. At the moment, there are not enough signs of this happening.
The interest rate hike means credit card debt could become even more expensive, particularly with rates already at record highs. McBride recommends considering 0% or low-rate balance transfer offers to shield yourself from further rate hikes, as well as boosting savings.
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In response to recent bank failures, McBride notes that multiple government agencies have taken proactive measures to mitigate the impact on the economy.
"The failure of one or two isn't necessarily an indicator of a broader problem throughout the system. But the crisis of confidence could have created broader troubles throughout the system," he said.
While raising interest rates may lead to short-term pain for consumers, experts agree that it is essential to control inflation as prices remain high across the board.
