federal reserve board chairman jerome powell speaks during a news conference at the federal reserve board building in washington dc on nov 2 2022 as was widely expected the federal reserve announced a 050 percentage point interest rate hike tuesday further increasing the costs of credit cards auto financing and variablerate loans rate increases aim to slow inflation but they also boost the cost of borrowing in the last year interest rates have jumped by about 3 for credit cards and have nearly doubled for auto financing and adjustablerate loans and mortgages with tuesdays increase those costs will rise slightly the good news is that the central banks benchmark rate increase is smaller than four previous jumbo hikes of 075 percentage point that means that the central bank is finally slowing the rate of its increases for the first time in 2022 the smaller hike reflects the feds belief that inflation will continue to moderate says greg mcbride chief analyst at bankrate however with the yearoveryear rate of inflation still above 7 we also have to check our expectations at the door when it comes to rate increases and therefore inflation ending anytime soon says mcbride when will inflation get better rate hikes can decrease inflation but it takes around nine to 12 months before the full effect of those increases are felt in the economy says mcbride that means it might take all of 2023 before inflation subsides to the feds target rate of 2 it also means that rate hikes will likely continue if the rate of inflation doesnt budge in that time we still have a long way to go before inflation is fully under control says mcbride we could see a meaningful drop in inflation in 2023 and still only be halfway to where we need to be by this time next year with the most recent increase the federal funds rate which influences the minimum interest rates that banks charge consumers has increased to a range of 425 to 45 thats the highest its been in 15 years but because more rate hikes are expected the federal funds rate is predicted to peak at 475 to 5 according to many forecasts including a recent bloomberg survey of 44 economists other forecasts project a higher rate of 5 to 525 this includes goldman sachs which expects three additional hikes of 025 percentage point in early 2023 despite the feds stated commitment to lowering inflation down to 2 that benchmark could change to 3 if the economy worsens says mcbride in that case its possible the fed could start slashing rates sooner id be very surprised if that happens in the near term because they have to work on restoring inflation credibility at this point not eroding it further says mcbride check out i missed the watercooler talk 3 women on wfh rto and trying to find the perfect worklife balance sign up now get smarter about your money and career with our weekly newsletter