The Federal Funds Rate is the interest rate at which banks lend money to each other overnight — but its influence goes far beyond Wall Street.
When the Federal Reserve raises or lowers this rate, it affects borrowing costs across the economy, including credit cards, auto loans, mortgages, and business loans. A higher Fed Funds Rate generally means higher interest rates for consumers, which can slow spending and inflation, while a lower rate encourages borrowing and economic growth.
Why it matters to you:
- Rising rates = higher loan costs, better savings yields
- Falling rates = cheaper borrowing, but lower interest on savings
- Investment impact: Shifts in the rate can influence stock and bond markets
Keeping an eye on the Fed’s moves can help you make smarter decisions about saving, borrowing, and investing.
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