The Federal Reserve announced Wednesday that interest rates will go up .75 of a point as part of the board's effort to slow inflation.
The increase marks the highest interest rates have been since 2008.
The higher interest rates make borrowing for items such as homes and cars more expensive.
The Fed Board voted unanimously to raise interest rates.
"Recent indicators point to modest growth in spending and production," the Fed said. "Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures. Russia's war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks."
The risk of raising interest rates, experts say, is that it could cause the U.S. to slip into a recession.
The effective federal interest rate is now over 3% for the first time since January 2008.
Interest rates peaked at 5.25% in late 2006 and early 2007, roughly a year before the U.S. went into a recession.
From 2009 through the middle of 2017, interest rates remained below 1% before reaching a peak of around 2.42% in 2019.
In response to the pandemic, the Fed lowered rates nearly to 0 until early this year.
But with the highest inflation in over four decades, the Fed has responded with a rapid succession of rate hikes.