Bank is raising Interest Rates. Its not a big move and it was widely telegraphed, but its important, nonetheless. Well get to what it means for your money in just a moment. First, economics reporter Steve Liesman explains just how a fed rate hike works. Reporter it was the predawn of the modern age. Twitter didnt exist. There was neither iphone nor ipad. The year, 2006. It was the last time the Federal Reserve raised Interest Rates. So its not embarrassing to ask, what exactly is a fed rate hike . The Federal Reserve controls outright only one Interest Rate in the economy. The one banks use to lend to each other overnight, or the fed funds rate. The prime rate is tied to the fed funds rate and many consumer loans and credit cards are tied to the prime rate. With a higher rate, the fed tries to slow down the economy. With a lower rate, it tries to stimulate the economy. Thats what the fed did with excessive cuts during the financial crisis of 2007. It slashed rates to the zero, with a b
With a lower rate, it tries toy s toies toy s toies to stimulate the economy. Thats what the fed did with excessive cuts during the financial crisis of 2007. It slashed rates to the zero, with a bin for nearly seven years. Raising rates this time will be complicated. When they were lowered to zero and the economy was still in the doldrums, the fed tried to stimulate growth by buying longterm bonds, pumping 4 trillion of cash into the banking system. Even with a higher fed funds rate, that money will stay in the system until the fed decides to decrease its balance sheet, which it could do, for example, by selling some of the assets it bought to help keep Interest Rates low. But that could be a while. Attention now turns to the feds the future rate hikes, which are likely to be slower and more gradual than a previous rate hike cycle. That means consumers shouldnt be too worried about soaring Interest Rates anytime soon. So, what does an Interest Rate increase mean to you and your money .
The Federal Reserve controls outright only one Interest Rate in the economy. The one banks use to lend to each other overnight, or the fed funds rate. The prime rate is tied to the fed funds rate and many consumer loans and credit cards are tied to the prime rate. With a higher rate, the fed tries to slow down the economy. With a lower rate, it tries toy s toies toy s toies to stimulate the economy. Thats what the fed did with excessive cuts during the financial crisis of 2007. It slashed rates to the zero, with a bin for nearly seven years. Raising rates this time will be complicated. When they were lowered to zero and the economy was still in the doldrums, the fed tried to stimulate growth by buying longterm bonds, pumping 4 trillion of cash into the banking system. Even with a higher fed funds rate, that money will stay in the system until the fed decides to decrease its balance sheet, which it could do, for example, by selling some of the assets it bought to help keep Interest Rate
Widely telegraphed, but its important, nonetheless. Well get to what it means for your money in just a moment. First, economics reporter Steve Liesman explains just how a fed rate hike works. Reporter it was the predawn of the modern age. Twitter didnt exist. There was neither iphone nor ipad. The year, 2006. It was the last time the Federal Reserve raised Interest Rates. So its not embarrassing to ask, what exactly is a fed rate hike . The Federal Reserve controls outright only one Interest Rate in the economy. The one banks use to lend to each other overnight, or the fed funds rate. The prime rate is tied to the fed funds rate and many consumer loans and credit cards are tied to the prime rate. With a higher rate, the fed tries to slow down the economy. With a lower rate, it tries to y s to ies to y s to ies to stimulate the economy. Thats what the fed did with excessive cuts during the financial crisis of 2007. It slashed rates to the zero, years. Raising rates this time will be com
Important, nonetheless. Well get to what it means for your money in just a moment. First, economics reporter Steve Liesman explains just how a fed rate hike works. Reporter it was the predawn of the modern age. Twitter didnt exist. There was neither iphone nor ipad. The year, 2006. It was the last time the Federal Reserve raised Interest Rates. So its not embarrassing to ask, what exactly is a fed rate hike . The Federal Reserve controls outright only one Interest Rate in the economy. The one banks use to lend to each other overnight, or the fed funds rate. The prime rate is tied to the fed funds rate and many consumer loans and credit cards are tied to the prime rate. With a higher rate, the fed tries to slow down the economy. With a lower rate, it tries y i stimulate the economy. Thats what the fed did with excessive cuts during the financial crisis of 2007. It slashed rates to the zero, with a bin for nearly seven years. Raising rates this time will be complicated. When they were lo