The financial system includes everything from the stock market to the banking sector to the wonky, technical products that make up the plumbing of the global economy. Changes in the federal funds rate influence those markets in the United States and abroad.
Bond traders, Wall Street bankers and market analysts all try to anticipate the Fed’s next moves. That amplifies the effect of interest rate increases and the central bank’s public messaging. Analysts might scrutinize Fed speeches in hopes of gleaning any hints on the exact size of the next interest rate hike, so the markets can start pricing in those moves ahead of time. The value of some financial instruments is also influenced by changes in the Fed’s overnight rate.
When rates go up, it becomes more expensive for businesses to borrow money. That can hurt future growth and weigh on a company’s stock performance. If enough companies see their stock prices go down, the whole market can sink. And as rates go up, risky stocks can seem less attractive because investors can make more money in safer assets than they can with low interest rates.
Meanwhile, bonds and interest rates have an inverse relationship. If interest rates go up, bond prices fall, and vice versa. Many bonds pay a fixed interest rate that’s more desirable if interest rates are going down, since demand for bonds usually rises then, along with their price.
Yeah thank you Fed. Was hoping to pop on over to a bigger house and let someone else enjoy a nice affordable starter home with 300 sq ft of deck space, but I'm not at a higher interest rate lol.
Look at the M3 before and then after the beginning of the pandemic, it was inevitable. They cranked up the money printers and haven't stopped since.
The only way to make our Country safe is to stop the Republican Senators from using this violent rhetoric behavior! The MAGA people are happy about an 82 year old man being hit with a hammer 🔨 , what if this was your grandfather? Not funny! Vote Blue and end this BS!
Bollocks - Increasing the interest rate punishes the working class to appease the already rich. A wage/price freeze is much more effective at inflation, but we already know the corporations don't want that.
Let’s go Brandon!
Normally, the financial system, consumer spending and business activity keep the hardware running. But at times, those cogs cause glitches or kick into overdrive, and the sprawling apparatus needs to be slowed down.
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