What is a Federal Reserve Rate? The Fed is the central bank o | 𝐅𝐁𝐒-𝐒𝐈𝐆𝐍𝐀𝐋𝐒®

What is a Federal Reserve Rate?

The Fed is the central bank of the United States. It sets monetary policy for the country by setting the federal funds rate, which commercial banks lend to each other over night.

It is the most important interest rate for markets because it affects nearly every financial product. If the Fed raises the rate, it signals that it sees too much money flowing through financial markets, leading to inflation.

On the other hand, a lower rate signals that there is too little money flowing through markets and that economic activity could slow down. As a result, markets generally follow the Fed's guidance on when to expect the next rate hike by betting on the direction of the federal funds rate.