The Federal Reserve has raised interest rates three times in the past six months and is widely expected to do so again in December. This marks a significant change in policy from the Fed which kept rates at near-zero for seven years after the financial crisis to help spur economic growth.
Some have argued that the Fed should have started raising rates sooner as the economy has been improving for several years now. Others have cautioned that raising rates too quickly could slow the economy’s momentum.
So far the economy has shown little sign of slowing down after the Fed’s rate hikes. Unemployment remains low and inflation is still below the Fed’s target of 2%.
There are a few reasons why the Fed has been raising rates. One is that the economy is now strong enough to handle higher rates. Another is that the Fed wants to head off inflation as the economy continues to improve.
The Fed’s actions have been closely watched by financial markets and the public. Its decisions can affect everything from mortgage rates to the stock market.
The Fed’s ultimate goal is to keep the economy growing at a steady pace without inflation or recession. So far it seems to be on track to accomplish that.
When was the last time the Federal Reserve raised interest rates?
December 16 2015
How often does the Federal Reserve meet to discuss interest rates?
Eight times a year or about every six weeks.
How are interest rates decided?
The Federal Open Market Committee sets the target range for the federal funds rate.
How does the Federal Reserve implement interest rate changes?
By buying and selling government securities in the open market.
What is the role of the federal funds rate?
The federal funds rate is the rate at which depository institutions lend funds maintained at the Federal Reserve to other depository institutions overnight.
How has the federal funds rate changed since the 2008 financial crisis?
The federal funds rate was lowered to near zero in December 2008 and has remained there since.
How does a change in the federal funds rate affect the economy?
A higher federal funds rate usually leads to higher borrowing costs for consumers and businesses and can slow economic growth.
What are the implications of a higher federal funds rate for savers?
A higher federal funds rate should mean higher interest rates on certificates of deposit and savings accounts.
What are the implications of a higher federal funds rate for borrowers?
A higher federal funds rate will usually mean higher interest rates on credit cards and loans.
What are the risks of raising interest rates too quickly?
Raising rates too quickly could slow economic growth or even lead to a recession.
What are the risks of not raising interest rates?
Not raising rates could lead to inflation or asset bubbles.
What are the risks of raising interest rates too slowly?
Raising rates too slowly could mean that inflation gets out of control.
What does the Federal Reserve use to assess the risks of inflation and economic growth?
The Federal Reserve uses a tool called the “dual mandate” to assess the risks of inflation and economic growth.
What is the “dual mandate”?
The “dual mandate” is the Federal Reserve’s mandate to promote maximum employment and stable prices.
How does the Federal Reserve assess the risks of inflation and economic growth?
The Federal Reserve assesses the risks of inflation and economic growth by looking at data on employment inflation and other economic indicators.
