At a high level, it is easy to understand what the Federal Reserve is attempting to do by raising interest rates. Inflation has skyrocketed and the Fed’s decision to raise interest rates should cool demand from consumers, ideally bringing inflation under control without pulling the economy into a recession.
But there is a lot that happens in the economy in between the decision to hike rates – by 0.25% in March, 0.5% in May, 0.75% in June and potentially even more in July and beyond – and the actual outcome the Fed is trying to achieve.
While the housing market may be the most obvious place where higher rates shape economic activity, there are plenty of other areas, from credit cards and car loans to lines of credit and equipment financing.
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