The Federal Reserve announced on Wednesday it's raising interest rates by another half point in an effort to stifle America's crushing inflation problem. While this is smaller than the three quarter-point hikes from the past four Fed meetings, it's still double the customary quarter-point raise.
"We have raised interest rates by four and a quarter percentage points this year," said Federal Reserve Chair Jerome Powell. "We continue to anticipate that ongoing increases in the target range for the federal funds rate will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% overtime."
As the Federal Reserve fights its war on inflation with repeated, unusually high interest rate hikes, it's not just the American people paying more to borrow money, but the federal government, too. In fact federal interest payments are on track to cost more than the defense budget in the coming years.
"Everyone knows you can't run up credit card debt forever. At some point you have to pay those bills back," says FreedomWorks economist Stephen Moore.
Moore is among those sounding the alarm on Washington's reckless spending.
"If we don't get the spending under control we're going to be looking at higher interest rates that's going to hurt our housing market because mortgage rates will go up," explains Moore. "It's going to hurt consumer finances and small businesses as they try to borrow. We've got to get out of this cycle of spend, print money, and then raise interest rates or else we're going to be facing a very precarious future."
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The federal government is already $31 trillion in debt, and that figure keeps going up every day. The rising costs of financing that debt will leave less and less money for Congress to spend on things like defense, health, infrastructure and education.
"One of the reasons that these interest rates are going up so rapidly now is because we let inflation get out of control through this massive government spending," says Moore. "We have to start, job number one, is to bring down government spending to bring down inflation and to restore fiscal sanity in Washington."
According to the U.S. Treasury Department, in fiscal 2022, the federal government made $475 billion in net interest payments, up from $352 billion the prior year.
Dr. Steven Skancke, an economic advisor at Keel Point Investments, tells CBN News' Faith Nation the Federal Reserve needs time to see the cumulative effects of its rate hikes.
"The higher interest rates do slow the economy," says Dr. Skancke. "As they slow down, the rate of increase to a half percent...and probably at the end of January or on February 1 maybe a quarter of a percent, they're giving us time to see those changes actually start to take place."
"$1.7 trillion we've lowered the federal debt," Biden said Tuesday. "No administration has ever cut the deficit that much. Now inflation is coming down as well."
In the months ahead, the economic focus is likely to shift from rising prices to rising interest rates and their impact on the economy and federal spending. In the longer term, those rising interest rates are likely going to be very expensive both for consumers and Washington.