The Fed And Interest Rates

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afford to make loans. People seeing these rises in rates will tend to sell
their low interest assets, in order to acquire additional money, 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. This was the case from 1989 until last month,
during which the nation's economy was generally considered to be in a slight to
moderate recession. During this period the Fed tried to keep interest rates low
to facilitate growth and spending in hard times. However, when inflation is
increasing too quickly and the economy is gaining strength, the Fed will attempt
to raise rates, as it ...

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