"The impact of a single, quarter-point interest rate hike is pretty minimal, but when we look at the cumulative effect of rate increases, the impact on households becomes clear," says Bankrate chief financial analyst Greg McBride.
"Credit card interest rates have reached record highs, rates on home equity lines of credit have nearly doubled in the past year, and the doubling of mortgage rates brought the housing market from red hot to ice cold in the span of a few months," McBride adds.
Interest rate hikes are meant to reduce inflation by making the costs of borrowing more expensive, but they also slow economic growth, which can lead to a recession. A recent poll of economists puts the chance of a recession in 2023 at 61%.
The rate of inflation has dropped from its year-over-year June peak of 9.1% to 6.5% in December 2022, which is still well above the Fed's benchmark target of 2%.
For that reason, Federal Reserve Chair Jerome Powell reaffirmed his commitment to keeping interest rates elevated until inflation is further tamed.
Check out the full story on CNBC Make It.
