By Kristin Myers, Editor-in-Chief

What's Happening Today

Just as anticipated, the Federal Reserve raised interest rates by 75 basis points or three-quarters of a percentage point yesterday, the biggest single rate hike since 1994. The rate hike will help bring down inflation. In May, the Consumer Price Index (CPI), which tracks changes in the costs of goods and services for consumers, rose 8.6% from a year ago, to a fresh 40-year high. In a press conference, Federal Reserve Chair Jerome Powell said the central bank was willing to get more aggressive in its fight against inflation, and commented that another rate hike of 50 or 75 basis points would be likely next month at the July Fed meeting.

While this rate hike changes the federal funds rate (the interest rate that banks use to borrow and lend money to each other), it impacts the interest rate banks will charge to lend money to you, too. Consumers can expect that interest rates on loans will go up, like those for mortgages, car loans, and personal loans. It also means that interest rates on credit cards will rise, making any credit card debt you might have more expensive.

When interest rates go up it's a good idea to start paying down any high-interest debt. And with prices overall on the rise, it's a good idea to revisit your budget to adjust your savings and spending so that you have enough money to cover higher costs of goods and services. And if it feels like you're spending too much each month, start to make a priority list, and cut back on buying anything that you don't think is necessary.

As mortgage rates rise, the housing market is starting to cool, weighing on homebuilder sentiment and new construction. The Census Bureau reported construction of new homes fell 14.4% in May, the lowest level since the start of the pandemic in 2020. The figures were down 3.5% from a year ago. Permits for building new privately-owned housing dropped 7% to 1.7 million, the lowest since September. Both were lower than economist estimates. But even as homebuying interest starts to decline, with a limited supply of housing, home prices might still take a while to fall.

- Kristin

Editors' Picks

Fed Intensifies Inflation Fight With Outsized Rate Hike (The Balance)

New Home Construction Takes Double-Digit Tumble (The Balance)

Three Money Mistakes to Avoid in a Bear Market (The Wall Street Journal)

Mortgage Rates Surge to the Highest Point Since 2008 (Yahoo Finance)

21% of Minimum Wage Earnings Guzzled by Gas Prices (The Balance)

US Faces a Fed-Triggered Recession That May Cost Biden a Second Term (Bloomberg)

What Laws Regulate Home Equity Lenders? (The Balance)

What Documents Are Needed for Estate Planning? (The Balance)

Off the Charts

Mortgage rates continue to climb, hitting their highest levels in years. The average rate offered for a conventional 30-year fixed mortgage spiked to 6.72% yesterday, and is now over 1 percentage point higher than it was at the beginning of June, according to data collected by The Balance.

Number of the Day

0% - That's how much U.S. GDP will grow in the second quarter, according to one model, suggesting the Fed is trying to slow an economy that's already at a standstill.