The Fed And Interest Rates

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they tend move toward higher yielding accounts, also further increasing the rate. Soon this small change by the Fed affects all aspects of business, from the price level to interest rates on credit cards.
Rises and falls in the interest rate can reflect many changes in an economy. When the economy is in a recession and needs a type of stimulus package, the Fed may attempt to decrease the interest rates to encourage growth and spending in the markets. However, when inflation is increasing too quickly and the economy is gaining strength, the Fed will attempt to raise rates, as it did late last March. This can be considered a sign that we are pulling out of the recession, or atleast it seems the Fed feels the recession of the early nineties is ending.
Directly after the Fed's actions, the stock market was a mess. The Dow took huge dips, falling as much as 50 points a day. Although no one knows exactly what influences the market, the increase in interest rates played a major ...

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