Federal Reserve Hikes Interest Rates, Affecting Borrowing Costs

The Federal Reserve's Federal Open Market Committee has voted to increase the federal funds rate from 3.75% to 4%. This short-term interest rate affects banks' overnight loans, and households and businesses with short-term debt will likely see an increase in borrowing costs.

David M. Yaskewich, Ph.D., a professor of economics at Southeast Missouri State University, notes that savers may benefit from the rate hike. 'If one group of people benefitted from today's decision, it would be those that are actually saving money,' he said.

The rate increase is expected to deter borrowing and spending, but Yaskewich warns that continued hikes could lead to increased inflation concerns and further rate increases, resulting in a more significant impact across the country.