What is the FED interest rate?
Also known as federal funds rate, is the interest rate that commercial banks in the United States charge each other when they borrow money overnight. This is the main tool that Federal Reserve (FED) used to regulate the money supply, control inflation and maintain economic growth.
Control inflation
One of the FED's primary goals when adjusting interest rates is to control inflation. When inflation exceeds the target level (usually 2%), the FED raises interest rates to reduce the money supply:
- How to: High interest rates increase the cost of borrowing, thereby reducing the spending and investment capacity of businesses and individuals.
- Impact: As demand falls, prices of goods and services will be more stable, helping to keep inflation under control.
Promote economic growth
When the US economy slows or falls into recession, the FED will lower interest rates to stimulate growth. This helps improve economic activity:
- How to: Low interest rates help reduce borrowing costs, thereby encouraging businesses to invest in expanding production and individuals to spend more.
- Impact: More money is pumped into the economy, stimulating production and creating jobs.
Maintain employment rate
The FED uses interest rate policy to balance labor supply and demand, thereby stabilizing the labor market:
- When unemployment is high: The FED lowers interest rates, encouraging businesses to borrow capital to expand their operations and create more jobs.
- When the labor market is too hot: The FED raises interest rates to reduce unsustainable wage growth pressure and avoid wage inflation.
The Fed's interest rate adjustment not only affects the US economy but also directly impacts US government bond yield, an important indicator of global economic health and investment trends.
Help balance labor supply and demand
What is a Fed rate hike and when will it happen?
The Fed's rate hike means that borrowing costs increase, causing businesses and individuals to reduce spending, thereby slowing economic growth and controlling inflation. This is one of the most powerful measures the Fed uses to regulate the economy.
When will the Fed raise interest rates?
- Inflation over target: The FED typically targets inflation at 2%. If inflation exceeds this level, interest rate hikes will be considered.
- Overheating economy: When the economy grows too fast, the risk of asset bubbles increases, the FED will raise interest rates to limit risks.
- Improving the labor market: When unemployment is low and wages are rising rapidly, the Fed raises interest rates to avoid wage inflation.
How to track Fed interest rates
Official website of the FED
The official website of the US Federal Reserve (FED) is the most reliable source of information for tracking interest rates. Here, the FED provides full announcements of interest rate decisions after each meeting of the Federal Open Market Committee (FOMC).
Additionally, the site publishes detailed meeting minutes, giving you a better understanding of the reasoning behind regulatory policies.
In particular, the FED website also includes long-term economic forecasts, from GDP growth, inflation to unemployment rates, giving you a comprehensive view of the US economic situation.
Bloomberg and Reuters
If you need to update information Fed interest rate For fast and in-depth coverage, Bloomberg and Reuters are two platforms that cannot be missed. These are the world's leading financial news sites, providing real-time information on interest rates, along with analysis from economic experts.
The two platforms' standout features include fast news, intuitive charts, and in-depth reports on the impact of interest rates on financial markets. With their high level of professionalism, Bloomberg and Reuters are ideal choices for those who want to keep up with market developments.
Investing platforms like TradingView
TradingView is a tool used by many investors not only to track stock and currency prices but also to update FED interest rates. With an intuitive interface, TradingView allows you to track interest rate chart over time, along with forecasts from the investor community.
Additionally, you can set up automatic notifications when interest rates change, so you don't miss any important information. TradingView also supports technical analysis tools, helping you evaluate trends and the impact of interest rates in detail.
How to track Fed interest rates
Impact of FED interest rates on financial markets
Impact on stocks
- Growth Stocks: Tech companies or startups that rely on debt financing are often negatively affected when the Fed raises interest rates.
- Defensive stocks: Sectors like healthcare, energy and consumer staples are typically more stable in high interest rate environments.
Impact on bonds
- Rising bond yields reduce the value of existing bonds, but attract investors to short-term bonds with more attractive yields.
Impact on the Forex Market
- When the Fed raises interest rates, the US dollar often appreciates, putting pressure on other currencies, especially in emerging countries that depend on international capital flows.
Fed interest rates and their impact on consumers
Impact on mortgages and credit
- Rising interest rates increase the cost of mortgages, causing the real estate market to slow down.
- The cost of credit cards and other consumer loans also increased, reducing people's spending power.
Impact on savings
High interest rates offer better returns on bank deposits, encouraging saving rather than spending.
Impact on commodity prices
High interest rates can reduce consumer demand, leading to more stable or falling prices.
Investment strategy when FED interest rate changes
When the Fed raises interest rates
- Focus on defensive stocks and short-term bonds.
- Consider investing in USD or USD-denominated financial instruments.
When the Fed lowers interest rates
- Shift to growth stocks and consumer industries.
- Invest in real estate due to lower home loan costs.
To cope with fluctuations caused by interest rates, many investors use Forex Signals App to make more accurate trading decisions.
How to invest when the FED interest rate changes
Fed interest rates and global impact
International capital flows
When the Fed raises interest rates, capital flows from emerging markets often return to the US, putting great pressure on countries that depend on foreign capital.
Trade balance
High interest rates make the dollar stronger, which hurts US exporters but makes imports cheaper.
Global economic stability
The Fed acts as the global monetary policy leader. Its interest rate decisions can influence similar policies from other central banks, creating a global chain of effects.
The Fed's interest rate adjustment is an important factor in the global economic picture. Don't miss the latest articles on finance and investment at news section of LiveTrade.
In short, Fed interest rate is a core factor shaping the global economy and financial markets. Whether the FED raises or lowers interest rates, you need to seize the investment opportunities from this change and build a balanced asset portfolio, taking full advantage of the market. Let LiveTrade Pro Accompany you in every step of investment!
