Inflation has surpassed expectations everywhere, and half of the world’s central banks have begun tightening monetary policy. Meanwhile, economic growth is slowing in many low and middle-income economies, and monetary-policy tightening has begun unlike any time in recent memory.
Almost everything that is borrowed affects interest rates. Credit cards, student loans, home loans, car loans, and savings accounts all have interest rates. The Federal Reserve aims to combat rising inflation by raising interest rates. Higher borrowing costs reduce consumer spending power, thereby reducing the demand side of the supply-demand equation.
The Federal Reserve is poised to raise interest rates again this year, likely at an accelerated rate. The European Central Bank has also indicated that it will raise rates this summer. The move would be the first rate hike in Europe in 11 years, and investors are confident that it will move quickly.