Federal Reserve policymakers’ decision to raise the benchmark for short-term interest rates is about to impact Americans’ budgets.
The federal funds rate stands at a range of 3.75% to 4%, a quarter percentage point higher than before.
Fed Chair Kevin Warsh explained that the decision was made in response to the United States’ stubborn inflation. The hope behind raising the range is that borrowing becomes more expensive, which can limit demand, and eventually brings down prices for Americans struggling with the cost of living. But the Fed can’t control everything. It has little influence over tariffs, war in the Middle East, and the AI buildout that are all contributing to the rise in prices consumers are experiencing.