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When the Federal Reserve changes interest rates, the impact reaches far beyond Wall Street. Higher rates can help savers earn more on their cash, while lower rates can make mortgages, car loans, and credit cards more affordable. But because every rate move creates both winners and losers, there's no simple answer to whether high or low rates are best.
Understanding why the Fed raises and lowers rates — and how those decisions affect your money — can help you make smarter choices about saving and borrowing.
The Federal Reserve is mandated by Congress to promote stable prices and maximum employment within the US economy. One of the tools it has at its disposal to achieve these goals is the federal funds rate.
During times of high inflation, for instance, the Fed will raise its federal funds rate, which is the rate banks charge each other for overnight loans to meet cash reserve requirements.
When the Federal Reserve changes interest rates, the impact reaches far beyond Wall Street. Higher rates can help savers earn more on their cash, while lower rates can make mortgages, car loans, and credit cards more affordable. But because every rate move creates both winners and losers, there's no simple answer to whether high or low rates are best.
Understanding why the Fed raises and lowers rates — and how those decisions affect your money — can help you make smarter choices about saving and borrowing.
The Federal Reserve is mandated by Congress to promote stable prices and maximum employment within the US economy. One of the tools it has at its disposal to achieve these goals is the federal funds rate.
During times of high inflation, for instance, the Fed will raise its federal funds rate, which is the rate banks charge each other for overnight loans to meet cash reserve requirements.
3 months ago
