The rate hike has been the talk of the town for a while. The Feds were being blamed for not raising interest rates earlier. Have it come across what is the effect of such interest rate hike on the economy and society?
It was studied that rate hikes are meant to control the extent of inflation. The Fed looks out for measures such as Gross Domestic Product (GDP) and Consumer Price Index (CPI) to determine if interest rates should be altered.
Scenario 1: Inflation (Healthy Economy)
Inflation happens when the economy or consumers' spending have been growing. In order to limit the price increases of products and services, the Feds will first decide if the time is right to increase interest rates. Other than slowing down inflation, a rate hike will make it more expensive for companies and consumers to take loans and in turn reduces borrowings and spending. As a ...