In his remarks outlining the central bank's decision, Fed Chairman Jerome Powell stated that inflation was "far too high."
The central bank increases interest rates, making it more expensive to finance a home or obtain a business loan. In response to the increase in interest rates, consumers are likely to borrow less money and spend less, which will slow the economy.
With the US benchmark WTI down to below $95 per barrel from its top of over $123 in March, the price of oil is going downward globally. From a record high of just over $5 a gallon in mid-June, gasoline prices at the pump have decreased by 69 cents.
Rates reach their estimated "neutral" level of 2.25 to 2.5 percent after a 75-point rate hike, which is the same as their estimate of a level that neither promotes nor inhibits growth. The central bank has made a fundamental change with this plan. It set interest rates at 0% and purchased billions of dollars' worth of bonds just four months ago to boost the economy during the Covid-19 pandemic.