Why did Fed raise interest rates again, making borrowing more expensive?
The Fed decided to raise the target range for the federal funds rate from 2.25% to 2.5%.
Inflation is usually driven by strong consumer demand, which is not matched by the supply. Supply bottlenecks with China during the Covid pandemic, Ukraine war, etc have all contributed to a weaker supply of many essential items we use every day. Since many of the supply chain issues can’t be fixed in short term, the Fed is trying to govern the demand aspect of the inflation. By raising interest rates, and making borrowing more expensive, the Fed is hoping to weaken Americans’ willingness to spend money and ultimately bring inflation to its 2% target level.
