On Wednesday, the Federal Reserve upped the ante in its fight against inflation by announcing the most significant increase in interest rates in the past 28 years.
This comes as the central bank attempts to reclaim control over the rapidly rising cost of consumer goods and services.
The Federal Reserve increased its benchmark interest rate by a quarter of a percentage point, marking the most significant increase in rates since the year 1994.
This comes after an increase of a quarter-point in March and an increase of half a point in May.
Up until a few days ago, the majority of economic analysts anticipated that the Fed would follow through with its earlier instructions and raise interest rates by another half percent this week.
A report that was released last Friday showed that inflation was stronger than predicted in May, and as a result, policymakers decided to take a more active action.
When compared to the same period last year, prices paid by consumers were 8.6 percent higher.
The increase is not only a reflection of increased expenses for gasoline and groceries; it also represents rising costs for rent, travel, and a wide variety of other services.
The Federal Reserve is planning to significantly increase interest rates in the hopes of reducing the level of consumer demand, which is the primary factor behind the current upward trend in prices.
When interest rates are higher, it will cost more money to carry a balance on a credit card, receive a loan for a car, or purchase a home.
A further drag on economic expansion is the rise in borrowing costs. In recent weeks, the stock markets have suffered losses due to concerns that move taken by the Federal Reserve regarding interest rates could even push the country into a recession.
The growth rate of 2.8 percent that Fed officials were forecasting for the economy three months ago has been revised downward to 1.7 percent, according to the projections released by Fed officials on Wednesday.
The likelihood of a so-called “soft landing,” in which inflation declines without a subsequent recession, will likely diminish further in 2023 as a result of the expected continuation of the slowdown in growth.