If you are a person living in the United States right now, you are probably at least medium worried about the economy. From inflation to the stock market, a lot about money feels pretty lousy. The good news: The Federal Reserve is taking action to try to bring down inflation and get the economy back to whatever normal is. The bad news: The action it’s taking isn’t going to immediately make everything better, and in the shorter term, it could make things feel worse.

“Getting inflation lower is usually painful because the Fed mainly has in its policy toolbox tools that make things even less affordable because the Fed’s policy toolbox is geared toward cooling demand,” said Gregory Daco, chief economist at EY-Parthenon. “If the Fed manages to cool demand, then there will be less price pressures, but cooling demand entails essentially making things more expensive.”

To put it more plainly, the idea is to tamp down consumer spending and slow business expansion by increasing costs in other areas (namely, borrowing and loans). The Fed is trying to get you, for now, to stop buying so much stuff.

On Wednesday, the Federal Reserve raised interest rates by three-quarters of a percentage point, its biggest increase in 28 years. The Fed was initially expected to raise rates by slightly less, but amid the May consumer price index coming in hot and consumer expectations for inflation rising, it acted more aggressively than anticipated. This marks the Fed’s third interest rate hike this year.

The hope is that, eventually, the Fed’s moves will bring down prices that people have definitely noticed creeping up all around them. But they will have shorter-term implications as well. Higher interest rates mean consumers should expect the cost of their credit card debt, mortgages, and car loans, among other items, to go up. The cost of borrowing for businesses will increase, too, and companies are likely to slow down on investments and hiring. The stock market has for weeks been reflecting some anxieties over the Fed as well, as higher interest rates cut into valuations and profits.

The forest it’s hard to see for the trees is a more balanced economy on the other side, but some of the trees are pretty thorny.

“Rates have already gone up, we already are in a transition phase where the economy is slowing down. The pieces are being put in place for a rebalancing of demand and supply, but it doesn’t happen overnight,” said Brian Bethune, a financial economist at Boston College. “It’s usually a bumpy ride.”

What the Fed is trying to do

The Fed’s line for a while was that inflation would be transitory: Once some of the kinks in the economy, such as supply chain crunches, were worked out, it would begin to fade on its own. But in recent months, the Fed has taken a more assertive stance. Powell has made a hawkish pivot, acknowledging inflation is “much too high” and indicating he’s dedicated to getting it down.

The Fed has three main tools at its disposal to try to gain control of the situation, Daco explained. The first is forward guidance, as in, communication, meaning talking to the public and saying what its intentions are in terms of monetary policy. Basically, if the Fed says it’s going to take control of the situation, the public — hopefully — believes it will. The second tool is raising the federal funds rate — the interest rate banks charge other banks — which will trickle out across the economy across interest rates and make it more expensive to borrow. (With Wednesday’s hike, the federal funds rate is 1.5 to 1.75 percent, and officials expect it to be above 3 percent by the end of the year.) The third is balance sheet normalization, which the Fed is just undertaking. It is starting to unload some assets, such as Treasuries and mortgage-backed securities, which should tighten financial conditions, though it will take some time.

Combined, this is intended to deter spending and lead to less money sloshing around in the economy overall. There are wide-ranging effects.

“When the Fed tightens monetary policy, that has a direct effect on equity prices, on long-term interest rates, on corporate bond spreads, on volatility, on the value of the dollar, on a number of financial measures,” Daco said.

Companies become more reluctant to invest and hire as credit becomes more expensive, the cost of equity increases, and the environment becomes more volatile. Declining markets have a negative impact on consumer moods, which also affects spending. There’s an intended chilling effect across the economy — one officials hope will not lead to a recession, though there are no guarantees. The Fed is walking a tightrope in trying to get from an accommodative, easy-money scenario to conditions that are normalized and tightened — without disrupting the economy too much.

This all is guaranteed to cause some short-term disruptions and problems, but in the long run, it’s all supposed to be worth it.

“We have to endure the short-term pain in the economy in order to get inflation back under control,” said Tara Sinclair, a senior fellow at the Indeed Hiring Lab. She compared the Fed hiking interest rates and tightening monetary policy to a medical treatment that might require patients to undergo something painful in order to have longer-term health. “Then, going forward, we can have a much more stable environment where we know prices are going to be growing about 2 percent per year, we have more certainty about that, we have a better sense of demand and supply coming together. That’s a better working environment for the economy as a whole, and businesses want that kind of certainty.”

If the Fed were to not increase interest rates and get inflation expectations in check, the risk is that prices would continue to spiral upward. Workers will also ask for higher wages, companies will raise prices to pay those wages, and it becomes a sort of cycle of doom. The central bank’s task now is to stop that from happening and to try to keep high inflation from becoming entrenched.

What this all means for you

What the Fed’s interest rate hike Wednesday means, as well as what it does going forward (basically, how fast it moves and how much), for different people depends on their position in the economy. If you’re a saver, this is not a bad deal for you. If you are looking to buy a house, yeesh.

In recent years, interest rates have been so low there’s been very little incentive to save. When rates go up, savers get higher interest rates and can make more money. “Conservative savers that have their money in the bank or bonds or whatever and stayed away from risky things have been paid nothing,” Bethune said.

For borrowers, the situation is quite the opposite. Mortgages have already shot up, with the 30-year fixed mortgage rate hitting 6.28 percent this week, an increase from 5.5 percent last week and well above the average of 3.25 percent in January.

Car loans will become more expensive, as will credit card debt.

“For credit cards, it’s going to show up pretty quickly, and it will impact not just things you buy in the future but your current balances, too,” said Matt Schulz, chief credit analyst at Lending Tree. Usually, when the Fed raises rates, credit cards’ APRs go up by about the same amount within a billing cycle or two, he said. “Generally, these individual rate hikes aren’t enough to really rock anybody’s world financially. The danger is when you have a lot of them in a short period of time, they add up pretty quickly and can be pretty impactful.”

Companies are likely to slow down on expansion and hiring, which we’ve already seen in some arenas, such as the tech sector. Depending on how aggressive the Fed is going forward, the economy could very well see an uptick in unemployment and more layoffs. (That said, firms may be a little more reluctant to lay off employees given how hard it was to re-hire during the pandemic.) Anxious companies reluctant to hire could just make it harder to find a new job.

If you’ve got money in the stock market, whether you’re day trading with Robinhood or just investing through your 401(k), things are already looking a little rough. In the long term, stocks generally go up, and most experts would advise you to hold on. Markets could continue to be rocky for a while, though how the market will react to any single piece of news — or, really, why it does anything — is hard to predict.

This is just not going to be very fun for a while

I would like to tell you that there are a million things you can do to completely insulate yourself from some of the pain that’s ahead, but then I would be lying, which I generally try not to do. So instead I will just say this: This sucks. Everything’s expensive, and for a while some things are going to be more expensive, and then eventually things will not be more expensive anymore. In the meantime, it’s not going to be particularly enjoyable. And there could be a recession on the way! (But a near-term recession is not at all a sure thing.)

One thing consumers can do to navigate the moment is to reduce some spending. Maybe put off the summer trip that hasn’t been booked yet, or save that home purchase for a later date, if possible. Walk instead of driving to your destination. “That’s something that will put them in a better position going forward, but also they’ll do their part in contributing to reducing demand,” Sinclair said.

Schulz said that if you have credit card debt, try to pay it down now, before rates go up even more. “That debt is only going to get more expensive in a pretty big hurry. It would definitely be smart to try and knock down that debt as much as you can,” he said. In its monthly review of credit card offers, Lending Tree found that the average APR on new credit cards is over 20 percent, the first time it has hit that since the company started tracking that stat in 2018. Half of the cards they track had their APRs increase in the past month.

One fun fact, or rather, tip: Consumers can call and ask to have their credit card interest rates reduced and, often, find success. According to Lending Tree, more than two-thirds of requests for lower credit card APRs are granted.

There are some measures you can try to take to prepare in the event of an economic downturn, such as building up savings and trying to be extra nice to your boss. But the real answer on how to prepare for a recession is sort of that you can’t.

“If you prepare for a recession, you end up having that recession. I mean, it’s pretty simple. Recessions are self-fulfilling prophecies,” Daco said. “If one person prepares for a recession, that’s fine, they’re going to retrench, they’re going to buy a little less, they’re going to be more careful with their outlays. That’s fine. But if 300 million or 350 million people do the same thing, if everybody cuts their spending by 5 percent, well, then there’s a 5 percent correction in spending, so that entails a recession.”

Still, the overall takeaway is that the going is going to be tough for a while, and some people are going to be able to better manage than others. “Just put off buying a car” isn’t realistic advice for everyone. There’s only so much the Fed can do on the economy’s current woes as well. It can take action on the demand side, but there’s not a lot for it to do on supply, which is where a lot of problems with energy and food prices are stemming from. Gas prices are likely to remain high for a while. Other factors putting pressure on prices, such as Russia’s war in Ukraine and the global Covid-19 outbreak, are beyond the control of anyone in the US government.

The economy, which feels terrible right now even if it isn’t really on paper, is about to get worse for a lot of people before, eventually, it gets better.

“The long-term situation the Fed feels that is much more important for them is to go ahead and reduce the pressures on the economy … so that we have a healthier, stable economy going forward,” Sinclair said. “That will set the economy up for better long-term growth.”

Now, everybody has to wait and see whether this pans out, and, in the meantime, deal with their rising gas receipts and credit card bills.