Federal Reserve Hikes Interest Rates by 75 Basis Points to 1.75%

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It’s the largest hike since 1994.

The Fed announced Wednesday it had hiked interest rates three quarters of a percentage point in an attempt to tamp down inflation, though the move may result in higher unemployment.

Higher interest rates put downward pressure on prices by making it more expensive for businesses and individuals to borrow money. When people have less money to spend, there is less demand for goods and services, meaning less incentive for firms to hike prices.

If spending slumps significantly, however, companies may wind up laying off workers. People who lose their jobs spend even less, and it can become a self-reinforcing cycle that is called a recession.