The Federal Reserve has raised its benchmark interest rate by 0.25 percentage points, bringing the target range to 3.75%–4.00%.

It is the Fed’s first rate increase since 2023, with officials pointing to inflation that remains above the central bank’s 2% long-term target.

So what does this mean for everyday Americans?

Higher interest rates can make some types of borrowing more expensive. Credit card rates, auto loans and other consumer borrowing can be affected, while mortgage rates can also respond to broader movements in financial markets.

For people who have money in savings accounts or certificates of deposit, higher rates can potentially mean better returns.

The Fed has also indicated that another increase could come later this year, depending on how inflation and the economy develop.

The latest decision is part of the Federal Reserve’s effort to bring inflation back toward its 2% goal while balancing the health of the broader economy.

Context: The rate change does not mean every American will immediately see higher costs. The effect depends on things such as existing loans, credit-card rates, mortgages and savings.