INDIANAPOLIS — The Federal Reserve raised the benchmark interest rate a quarter point during its July meeting.
That makes the rate the highest it's been in more than 20 years.
This comes after June's brief pause in increases.
Why do we keep seeing rate increases?
The Federal Reserve keeps raising the rate because it wants to slow inflation.
When borrowing gets more expensive, people tend to ease their spending.
Greg McBride, Bankrate's chief financial analyst, said the Fed continues to raise the rate because the progress, by some measures, has stalled recently.
"They need to get rates up to a level that's high enough to slow the economy, reduce demand, and point inflation down toward that 2% level," McBride said.
What is the rate increase's impact?
If you have debt with a variable interest or interest that can change with market conditions, that can go up as early as the next billing cycle.
For example, McBride said the average credit card rate right now is well above 20%, and rates for home equity lines of credit are at a 22-year high.
Existing debt with a fixed rate, like your mortgage or car note, will stay the same. However, new fixed-rate loans will be influenced by the rate changes.
As for market opportunities, look at where your money is sitting. High-yield savings accounts are paying more than 4% and Certificates of Deposit more than 5%.
Certificates of Deposit require the money to remain in an account for a length of time. If you try to access it earlier, penalties can apply.
Will this be the last hike?
We are not sure.
The Federal Reserve, McBride said, left the door open.
"There's a lot of economic data and a couple of really important inflation releases between now and their next meeting in September that's really going to dictate whether they raise rates at that point," McBride said.