By: David Straughan and Jennifer Chonillo

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On March 16, Chairman Jerome Powell announced that, for the first time since 2018, the Federal Reserve would be raising the interest rate: from 0% ? 0.25% to 0.25% ? 0.5%. The Fed raised the rate again on May 4 ? this time to 0.75% ? 1%. These increases will impact many industries in the U.S. and around the world, especially lending and finance.

Those effects also have the potential to reverberate through industries that depend on financing, such as the automotive industry. But what those effects could be and to what extent they?ll affect the industry remain to be seen.

The Difference Between Interest Rates and ?The Interest Rate?
When people talk about interest rates, they?re typically referring to the rates consumers pay to borrow money from financial institutions. When people talk about ?the interest rate,? they?re usually referring to the rate set by the Federal Reserve, also known as the federal funds rate. These two are related, but the difference between them is critical.

The federal funds rate refers to the rate financial institutions pay to borrow money from one another overnight. This rate affects the rates at which those institutions can invest or lend money to businesses and individuals.

How the Interest Rate Increase Could Impact the Auto Industry

Nearly every industry will be affected b...