Federal Reserve.

In plain English

The Federal Reserve (the 'Fed') is the U.S. central bank. Its main job is to keep prices stable (controlling inflation) and employment high. Its main tool is the federal funds rate, the interest rate at which banks lend to each other overnight. By raising or lowering this rate, the Fed influences mortgage rates, credit card rates, savings yields, and overall economic activity. The Fed's policy committee (FOMC) meets about eight times per year to set the rate.

01Why it matters

When the Fed raises rates, borrowing gets more expensive (mortgages, car loans, credit cards) and saving pays more (HYSAs, CDs, bond yields go up). When the Fed cuts rates, the opposite happens. Knowing whether the Fed is in a hiking, holding, or cutting cycle helps you understand why your mortgage quote changed and why your savings rate moved.

02The math, step by step

Between early 2022 and mid-2023, the Fed raised the federal funds rate from near 0% to roughly 5.25-5.50%. Within months, mortgage rates went from 3% to over 7%, savings account yields rose from near 0% to 4-5%, and credit card APRs ticked up several points. The Fed didn't directly set any of those rates, it set the underlying one, and the rest moved in response.

03What this is NOT

04Receipts

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