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Level-graded English lessons with reading, listening, activities, and discussion.

Lesson Info

Type
Article
Level
4 / B2
Published
Title
Fed Raises Rates to Fight Inflation
Webpage
https://eslnewsstories.com/articles/2026-09-18-fed-raises-rates-to-fight-inflation/

Lesson Content

Warm-up, Vocab List, Reading and Audio

Understanding: Main Idea, True or False, Multiple Choice

Language: Words That Go Together, New Sentences

Use It: Discussion Builder, Discussion Questions

Answers

How might higher interest rates change a family's money decisions?

a) They may save more and borrow less

b) They may spend more before prices rise again

c) They may make no changes to their plans

Illustration of a balance scale in front of a large government-style building, weighing household costs against a red upward arrow and stacks of coins.
Balancing costs and rates.

Vocab List

Federal Reserve (n. phrase) — the central bank of the United States, which controls interest rates and the money supply
borrowing (n.) — the act of taking money from a bank or another person and agreeing to pay it back
inflation (n.) — a general rise in the prices of goods and services over time
prime lending rate (n. phrase) — the interest rate that banks offer to their best business customers, used to help set other loan rates
interest rate (n. phrase) — the amount of money charged for borrowing money, shown as a percentage
mortgage (n.) — a large loan used to buy a home or other property
central bank (n. phrase) — a country’s main bank, which controls interest rates and the money supply
refinance (v.) — to replace an existing loan with a new one, often with different payments or interest rates
target (n.) — a result or level that someone is trying to reach
fixed-rate mortgage (n. phrase) — a home loan with an interest rate that does not change for a set period
Reading

The Federal Reserve has raised US interest rates for the first time in more than three years, saying inflation has stayed too high for too long. The central bank increased its main rate to a range of 3.75% to 4%, from 3.5% to 3.75%, and officials suggested that further increases may follow.

Fed Chair Kevin Warsh said inflation has remained above the Fed’s 2% target for more than five years. Although the Fed cannot control the price of a particular product, such as oil or food, it can try to stop higher costs from spreading through the wider economy.

Higher interest rates are one of the Fed’s main tools for doing this. When borrowing becomes more expensive, people and businesses may spend less and save more. This can reduce demand and slow the pace of price increases over time.

However, the policy also creates problems for borrowers. Major US banks raised their prime lending rates after the Fed’s decision, which could increase the cost of credit cards and personal loans. People looking for a new mortgage or refinancing an existing loan may also face higher payments. Homeowners with fixed-rate mortgages are less likely to see an immediate change.

The Fed faces a difficult balance. Its leaders believe the jobs market and the wider economy are strong enough to handle higher interest rates. But if rates stay high or rise further, businesses may postpone investment in new projects and economic growth could weaken. The Fed expects inflation to fall gradually toward its target by 2029.

Fed Raises Rates to Fight Inflation

Level 4 Article Source: bbc.com
Warm-up → or → Check Understanding → Language → Use It

Illustration of a balance scale in front of a large government-style building, weighing household costs against a red upward arrow and stacks of coins.
Balancing costs and rates.

The Federal Reserve has raised US interest rates for the first time in more than three years, saying inflation has stayed too high for too long. The central bank increased its main rate to a range of 3.75% to 4%, from 3.5% to 3.75%, and officials suggested that further increases may follow.

Fed Chair Kevin Warsh said inflation has remained above the Fed’s 2% target for more than five years. Although the Fed cannot control the price of a particular product, such as oil or food, it can try to stop higher costs from spreading through the wider economy.

Higher interest rates are one of the Fed’s main tools for doing this. When borrowing becomes more expensive, people and businesses may spend less and save more. This can reduce demand and slow the pace of price increases over time.

However, the policy also creates problems for borrowers. Major US banks raised their prime lending rates after the Fed’s decision, which could increase the cost of credit cards and personal loans. People looking for a new mortgage or refinancing an existing loan may also face higher payments. Homeowners with fixed-rate mortgages are less likely to see an immediate change.

The Fed faces a difficult balance. Its leaders believe the jobs market and the wider economy are strong enough to handle higher interest rates. But if rates stay high or rise further, businesses may postpone investment in new projects and economic growth could weaken. The Fed expects inflation to fall gradually toward its target by 2029.

Speaker: American Female  Duration: 1:54  YouTube

Listen Closely

Listen and Fill Gaps

Listen to the audio on eslnewsstories.com and complete the gaps below:

The Federal Reserve has (1) US interest rates for the first time in more than three years, saying inflation has stayed too high for too long. The central bank increased its main rate to a range of 3.75% to 4%, from 3.5% to 3.75%, and officials suggested that further increases may follow.

Fed Chair Kevin Warsh said inflation has (2) above the Fed’s 2% target for more than five years. Although the Fed cannot control the price of a particular product, such as oil or food, it can try to stop higher costs from spreading through the wider economy.

Higher interest rates are one of the Fed’s main tools for doing this. When (3) becomes more expensive, people and businesses may spend less and save more. This can reduce demand and slow the pace of price increases over time.

However, the policy also creates problems for borrowers. Major US banks raised their prime lending rates after the Fed’s decision, which could increase the cost of credit cards and personal loans. People looking for a new mortgage or refinancing an existing loan may also face higher payments. Homeowners with fixed-rate mortgages are less likely to see an (4) change.

The Fed faces a difficult balance. Its leaders believe the jobs market and the wider economy are strong enough to handle higher interest rates. But if rates stay high or rise further, businesses may postpone investment in new projects and economic growth could (5) . The Fed expects inflation to fall (6) toward its target by 2029.

Listen and Fill Gaps

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Discussion Builder

  1. Q: The article says higher interest rates can make people spend less. What kinds of spending do you think people reduce first?

    A:

  2. Q: How could higher interest rates affect someone who wants to buy a home or start a small business?

    A:
Use It

Discussion Builder

Choose the best phrase for each gap:

  1. Q: The article says higher interest rates can make people spend less. What kinds of spending do you think people reduce first?

    A: I think people reduce spending on restaurant meals first. they may cook at home more often.

    For that reason, / However, / For example,

    I think people reduce spending on restaurant meals first. For that reason, they may cook at home more often.

  2. Q: How could higher interest rates affect someone who wants to buy a home or start a small business?

    A: I think higher rates would make a home loan more expensive. some people might wait before buying a home.

    As a result, / However, / For example,

    I think higher rates would make a home loan more expensive. As a result, some people might wait before buying a home.

Discussion Questions
  1. The article says higher interest rates can make people spend less. What kinds of spending do you think people reduce first?
  2. Have you noticed inflation in your daily life? Which goods or services seem more expensive than before?
  3. How could higher interest rates affect someone who wants to buy a home or start a small business?
  4. A mortgage is often paid over many years. What factors would you consider before choosing a fixed-rate mortgage?
  5. In your country, who makes important decisions about interest rates, and do people pay attention to those decisions?
  6. The article describes a difficult balance between reducing inflation and protecting economic growth. Which risk would worry you more: rising prices or fewer job opportunities?
  7. Should people learn more about borrowing, interest rates, and personal budgets at school? What practical topics would be most useful?
  8. What is one personal financial target you would like to reach in the next few years, and what could help you reach it?

Discussion Questions

  1. The article says higher interest rates can make people spend less. What kinds of spending do you think people reduce first?
  2. Have you noticed inflation in your daily life? Which goods or services seem more expensive than before?
  3. How could higher interest rates affect someone who wants to buy a home or start a small business?
  4. A mortgage is often paid over many years. What factors would you consider before choosing a fixed-rate mortgage?
  5. In your country, who makes important decisions about interest rates, and do people pay attention to those decisions?
  6. The article describes a difficult balance between reducing inflation and protecting economic growth. Which risk would worry you more: rising prices or fewer job opportunities?
  7. Should people learn more about borrowing, interest rates, and personal budgets at school? What practical topics would be most useful?
  8. What is one personal financial target you would like to reach in the next few years, and what could help you reach it?

Answers Fed Raises Rates to Fight Inflation / Level 4

Listening: (1) raised, (2) remained, (3) borrowing, (4) immediate, (5) weaken, (6) gradually

Main Idea: The Fed raised interest rates to slow inflation, even though this may make borrowing cost more and weaken growth.

True or False:

  1. True. Fed Chair Kevin Warsh said inflation had remained above the Fed’s 2% target for more than five years.
  2. False. When borrowing costs more, people and businesses may spend less and save more. This can reduce demand and slow price increases.
  3. False. The story says homeowners with fixed-rate mortgages are less likely to see an immediate change in their payments.

Multiple Choice: c, a, a, b

Vocabulary:

  1. raise: interest rates
  2. central: bank
  3. reduce: demand
  1. fixed-rate: mortgage
  2. refinance: a loan
  3. postpone: investment

New Sentences: 1. inflation; 2. interest rate; 3. target; 4. borrowing; 5. mortgage; 6. refinance

Discussion Builder:

Hints: 1) Expressing a result. 2) Expressing a result.

  1. For that reason,
  2. As a result,

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