Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.

Last Wednesday, the Fed raised the federal funds rate—therate banks charge each other for overnight loans—by 0.75%, its biggest hike since 1994. This takes the federal funds rate up to a range of 1.5%-1.75%, which is still a very low level. The Fed also said it would continue raising rates at a quick pace this year, to about 3.4% by December. That’s a big change from what it said just three months ago, when it expected rates to be at 1.9% at the end of 2022. What changed the Fed’s mind? You really don’t have to look past the latest reports on consumer and producer prices. The Friday before last, we found out that consumer prices rose at an 8.6% annual pace in May, the fastest increase since December 1981. Last Monday, it was reported that producer prices surged 10.8% over the past year, just below a record level. These reports forced the Fed to go bigger than the 0.50% hike most were looking for. There were also significant changes to the Fed’s economic projections for this year:

The Fed is looking for economic growth of just 1.7% this year, over 1% lower than its March forecast. This indicates to me they are worried about a recession, which may be why they upped their forecast for unemployment a little bit. For those of you wondering, PCE stands for personal consumption expenditures, and this index is the Fed’s preferred measure of inflation. So, what does this mean for you? Higher rates on credit cards, which are currently averaging 16.61%, and may be headed to a record high of near 19% by the end of 2022. Also, expect adjustable-rate mortgage and home equity rates to rise soon. For long-term fixed-rate mortgages, the impact is not as direct. Those rates are based on future inflation expectations, so they don’t always move in step with the federal funds rate. While 30-year mortgage rates have doubled in the past year, I’m legally obliged to point out they are still low by historical standards. Another thing to be concerned about is the possibility of a recession. I’m sure you’ve been hearing a lot about the "soft landing" the Fed is trying to engineer. This means raising rates at a high enough level to slow economic growth and bring inflation down, but not too fast as to cause a recession. The high rate of inflation combined with waiting too long to act has left the Fed no choice but to be aggressive, even if it causes a brief recession. I should point out this wouldn’t be the first time that’s happened, as then chairman Paul Volcker did it on purpose 40 years ago. I think the odds are high we have a brief recession either at the end of this year, or early in 2023. A recent CNBC survey of CFOs found that 68% expect a recession in the first half of 2023. In other depressing news, the Commerce Department reported Wednesday that retail sales unexpectedly fell in May, which also has people worried about the econo