The FED Rates Raise EXPLAINED. Pain is coming In 2022
The Federal Reserve's mission is to keep the U.S. economy humming—not too hot, not too cold, but just right. When the economy booms and "runs hot," distortions like inflation and asset bubbles can threaten economic stability. That's when the Fed steps in and raises interest rates, which helps cool down the economy and keep growth on track.
00:00 - Rate Increasing influence
01:30 - Why rates are increasing
02:20 - The goal of rate increasing
03:10 - How rates influences mortgages
05:00 - What sphere will FED rates affect
06:40 - Rates and credit cards
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For sure such changes will influence every family, every household. It will affect mortgages, stocks, bonds, and credit cards. To understand how everything works and why everyone (you, you, and you will be impacted) we should get a better understanding of what is Federal Funds rate is and how it is connected with the entire economy and every family in the U.S.
Why I'm sure that in 2022 everyone will be affected, in simple words, Federal Interest rate - it is a rate which FED uses to give extra money to banks which need it. In the evening, banks check how much money they have, and if its level is too low - they ask FED to borrow them some money for one night.
At its regular meetings, the Federal Open Market Committee ( aka group of senior guys making serious decisions) sets a target range for the federal funds rate, which acts as a reference for big commercial banks' interest rates. That is why the federal funds rate is the most important benchmark for interest rates in the U.S. economy.
The goal of raising the federal fund's target rate is to increase the cost of credit throughout the economy when the economy is too hot. Higher interest rates make loans more expensive for both businesses and consumers, and everyone ends up spending more on interest payments.
Those who can't or don't want to afford the higher payments postpone projects that involve financing. It simultaneously encourages people to save money to earn higher interest payments. It reduces the supply of money in circulation, which tends to lower inflation and moderate economic activity—a.k.a. cool off the economy.
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