#FOMC - ALL YOU NEED TO KNOW:
Have you ever wondered what the Federal Funds Rate is and how it affects the economy?
Let's break it down in simple terms. π (1/11)
Have you ever wondered what the Federal Funds Rate is and how it affects the economy?
Let's break it down in simple terms. π (1/11)
1οΈβ£ Banks rely on deposits from customers to lend money to others.
(2/11)
(2/11)
2οΈβ£ To ensure stability, regulators require banks to keep a portion of their money in reserve.
(3/11)
(3/11)
3οΈβ£ Banks' reserve requirements change daily due to deposits, withdrawals, and loans.
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(4/11)
4οΈβ£ Sometimes, banks need to borrow money overnight from each other to meet these requirements or to lend out their excess reserves. π¦πΈ
(5/11)
(5/11)
Enter the Federal Funds Rate!
It's a benchmark rate set by the Federal Open Markets Committee (FOMC) that guides these overnight borrowings and lendings. π‘
But why does it matter? Let's zoom out and see the bigger picture. π
(6/11)
It's a benchmark rate set by the Federal Open Markets Committee (FOMC) that guides these overnight borrowings and lendings. π‘
But why does it matter? Let's zoom out and see the bigger picture. π
(6/11)
The Federal Reserve has two main objectives:
1οΈβ£ Keep prices stable (controlling inflation).
2οΈβ£ Support maximum employment.
(7/11)
1οΈβ£ Keep prices stable (controlling inflation).
2οΈβ£ Support maximum employment.
(7/11)
Here's how the Federal Funds Rate comes into play: (8/11)
1οΈβ£ When the Fed raises the rate, it makes borrowing money more expensive.
This reduces the supply of credit and can help lower inflation. However, it may also lead to increased unemployment. β¬οΈπ½
(9/11)
This reduces the supply of credit and can help lower inflation. However, it may also lead to increased unemployment. β¬οΈπ½
(9/11)
2οΈβ£ On the other hand, when the rate is lowered, it becomes cheaper to borrow money. T
his stimulates economic growth, as companies can expand and hire more easily. But if the rate stays low for too long, it could potentially lead to inflation. β¬οΈπ
(10/11)
his stimulates economic growth, as companies can expand and hire more easily. But if the rate stays low for too long, it could potentially lead to inflation. β¬οΈπ
(10/11)
Finding the right balance is crucial for the Federal Reserve to maintain stable prices & support employment.
The Fed Funds Rate plays a significant role in shaping the credit market and influencing the overall economy.
Follow @RagingBetr for more threads like this!πΌπ°
(11/11)
The Fed Funds Rate plays a significant role in shaping the credit market and influencing the overall economy.
Follow @RagingBetr for more threads like this!πΌπ°
(11/11)
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