Why does the Federal Reserve raise interest rates?

Borrowing money just became a bit more expensive in the United States. The Federal Reserve raised benchmark interest rates on September 26 – from 2 and 2.25 percent for non-Treasury bank loans.

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Jerome Powell, chairman of the Federal Reserve said that rates were raised because of the “bright moment“ in the economy, a reference to the country’s high economic growth (Bloomberg). This is the third time the Federal Reserve has raised the benchmark rate in 2018. This decision is part of the Fed’s larger plan to “normalize” monetary policy after famously keeping rates at zero percent to incentivize lending immediately after the Great Recession of 2008.

Consumers could see higher interest rates on mortgages, credit cards and other loans after this increase, according to CNN. President Donald J. Trump criticized the decision as hurting the national economy.

“We’re doing great as a country. Unfortunately they just raised interest rates because we are doing so well. I’m not happy about that,” he said at a press conference at the United Nations General Assembly.

Help explain benchmark interest rates…

Why does the Federal Reserve need to raise rates?

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