What does the Federal Reserve’s continual rise in the target federal funds rate mean to the economy?
When the Federal Reserve decides to raise the target federal funds rate, it is trying to control inflation and maintain price stability. The target federal funds rate is the interest rate charged between banks on overnight loans, and it drives all other types of interest rates. As a result of the increasing target federal funds rate, all other interest rates will rise. On the upside, savings accounts, CDs, and money market funds will increase their interest rate returns, so you will be getting a higher return on your money. However, on the downside, mortgage rates will rise from their all time lows, home equity loan rates will increase, bank-financed car loans will increase, and all other types of bank loan rates will increase as well. In the financial market, generally as interest rates rise so do yields. As yields rise prices of bonds fall. However, stocks generally tend to move higher in a higher interest rate environment. Fundamentally, the Federal Reserve does not have the power t
