How the Fed’s Rate Hike Is Affecting Your Finances, Explained in 60 Seconds
It’s hard to miss the buzz about the Federal Reserve’s decision to raise interest rates to slow inflation in 2022, but do you know how the Fed’s interest rate hike affects personal finances?
The federal funds rate, as its officially known, is the interest rate that banks pay to borrow money from other banks. Banks are required by federal law to keep a minimum amount of money in reserve overnight, and those that fall short can borrow money from banks with excess reserves to make up the deficit.
The Federal Reserve meets eight times a year to set the federal funds rate. It is considered one of the Fed’s primary tools for influencing the overall economy. The decision to raise or lower rates affects consumers’ personal finances, too.
How does it do that? Watch this video to learn more.
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