The Federal Reserve raised key interest rates by 0.25% Wednesday in an effort to tame the worst inflation since the 1970s.
This marks the start of its effort to curb the high inflation that has followed the recovery from the recession.
As recently as December, Fed officials had expected to raise rates just three times this year.
Now, its projected seven hikes would raise its short-term rate to 1.875% at the end of 2022.
The central bank’s policymakers expect inflation to remain elevated and to end 2022 at 4.3%, according to updated quarterly projections they released Wednesday.
That’s far above the Fed’s 2% annual target.
The officials also now forecast much slower economic growth this year, of 2.8%, down from its 4% estimate in December.
In February, annual inflation reached 7.9% and goods experienced the steepest rise in prices since 1982.
Chair Jerome Powell said Wednesday that while there is no certainty about where the economy will be one year from now, "the probability of a recession within the next year is not particularly elevated."
However, Powell added that many factors, including the Fed's new action and a change in supply chains, will help improve inflation in 2022.
Chair Powell recognized that people with low income are especially affected by high inflation.
"High inflation takes a toll on everyone but really, especially on people who use most of their income to buy essentials, like food, housing and transportation."
Powell went on to say that middle-income households tend to have more room to absorb the effects of inflation.
However, families won't see benefits immediately.
The hike is expected to raise credit card interest rates from about 16% to 17%.
Should that happen, monthly minimum payments will go up, and if that's all a person pays, the debt will be $300-$400 more in the end.
That's a big impact when the average credit card debt in the U.S. is around $5,000.
When it comes to car loans, the rate hike will likely raise a monthly payment on a $25,000 car about $5 to $15.
In terms of homes, a $400,000 mortgage would be around $200 more each month and at least $70,000 more over 30 years. That may impact someone's decision to buy and could cool off a red-hot housing market.
There is at least one benefit from the change – people will earn more interest from their savings accounts.