On Wednesday, central bank policymakers announced they would raise interest rates by 0.75 percent, their most aggressive move yet to control soaring inflation. Stocks surged afterward, snapping a five-day losing streak, with the Dow jumping more than 300 points, or 1 percent; the S&P 500 climbing 1.5 percent; and the Nasdaq soaring 2.5 percent.
The Fed’s move to hike interest rates was designed to cool the economy by curbing consumer spending. At higher rates, consumers will find the prices of mortgages, auto loans, and other financed purchases harder to come by. By discouraging people from dolling out their money, the Fed aims to temper demand, which would eventually force prices to come down and stabilize inflation.
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