Federal interest rates are going up once again.

The Federal Reserve announced it was raising its key interest rate by a quarter point, making it the ninth rate hike in a year.

We spoke to Michael Clarke, the director of the Center for Business and Economic Research at the University of Kentucky, about the Fed's strategy and what it means for consumers.

When we talk about the Federal Reserve raising the interest rate, what they're really doing is they're raising the interest rate at which banks loan to one another.

And this is a key interest rate.

And as it increases, interest rates for consumers and businesses will tend to follow suit.

So consumer loans, mortgages, your car loans, credit card debt, the interest rate on those would tend to go up as the Federal Reserve increases its interest rates.

So, you know, if you're in a household where you're thinking about maybe buying a house, it just means that, you know, borrowing that money became more expensive.

Or if you're borrowing money for a car, you know, that has increased the cost of borrowing that car.

And so those consumers will tend to pull back, you know, in terms of how much they might be borrowing.

They might postpone the purchase of a car or a house or something of that nature simply because the cost of purchasing that has gone up.

Well, we had the situation of strong demand and firms weren't able to meet that demand.

They were seeing a lot of their supply issues, reducing how much they could supply.

That caused prices to go up significantly.

Instead of running about 2% per year.

They were increasing much faster than that.

Inflation rates got up to, you know, seven, eight, 9% year over year.

The Federal Reserve is trying to increase interest rates, slow that demand for goods and services down to the point where we can bring inflation back in line with what we'd seen prior to the pandemic.

I think the big thing is to understand that while, yes, you know, there are some costs associated with the higher interest rates, those higher interest rates do serve a purpose and it's to address that cost or the harm that inflation can do to households and businesses.

That's really kind of the key takeaway from this.

Clarke said while it is hard to predict what the Federal Reserve will do.

Many economists believe there will be fewer, if any, additional rate hikes this year.