On May 4, 2022 the Federal Reserve raised interest rates by 50 basis points, one of the highest point rate hikes since 2000. Investors, analysts and strategists joined Yahoo Finance, reacted to the news and broke down what this could mean for consumers.

Video Transcript

BRIAN CHEUNG: First of all, we have to acknowledge just the unprecedented nature of what happened from the Fed. They haven't raised by more than 25 basis points in one meeting since 2000. At the time it was NSYNC topping the charts, razor scooters were all the rage a long time ago. But what caught a lot of attention was whether or not the Federal Reserve was going to further get more aggressive with perhaps, maybe a 75 basis point move? But the Fed chairman saying not likely a chance.

JEROME POWELL: 75 basis point increase is not something the committee is actively considering. What we are doing is we raised 50 basis points today. And we've said that-- again, assuming that economic and financial conditions evolve in ways that are consistent with our expectations, there's a broad sense on the committee that additional 50 basis increases should be on-- 50 basis point increases should be on the table for the next couple of meetings.

SEEMA SHAH: It's exactly what was expected. We needed the Fed to make a move-- make an aggressive move. And I think they've delivered here. But keep in mind that the inflation risk since the last meeting, seven weeks ago, has only increased. We've got inflation expectations moving higher. You've got inflation at 8.5%, wage growth up.

So it's clear that this isn't going to be enough. And I think all eyes now during the press conference is going to be any kind of guidance that Powell is able to provide about what to expect over the coming weeks. So the 50 basis point move-- they've got a very, very difficult job ahead of them. And from my perspective, the only remedy to such high inflation is unfortunately going to be recession.

MICHAEL COX: Fed Chairman Powell pointing the finger at other causes of inflation-- supply chain problems, oil and gas problems, labor shortages and so on. Look, the Fed has increased the M2 money supply 43% since February of 2020. That's since the COVID began. 43% more money put into the economy is going to cause inflation.

And you don't need to look elsewhere for something beyond that, beyond the Fed, for some reason why we have so much inflation. Certainly it's good that the Fed finally raised rates. That, to me, is the reason that the market is up. The market is finally saying, thank you. There's been too much hesitation, too much waiting, too little courage, too much talk, and not enough action.

BRIAN CHEUNG: Either way you cut or slice it is that it's going to take an economic hit. That's the consequence of these high rates.

- Cost of borrowing is going to go up. Bottom line, Fed is trying to slow down spending to bring costs down. I mean, that's kind of the objective here.