Fed Raises Interest Rates Half a Point to Highest Level in 15 years

Good Job! - The Fed’s benchmark interest rate is the federal funds rate. The Fed’s stable-prices target is an inflation rate of 2 percent a year. The Fed raises the federal funds rate when the inflation rate rises above target.

Correct! - When the Fed slows the interest rate rise, aggregate demand growth slows but remains positive. The slower growth of aggregate demand lowers the inflation rate and at the same time avoids recession.