I understand that when they happen, all interest goes up but why ? And what does 50bp into 2% actually means ? How long would it take for the rates to actually rise ?
In: 2
What the Fed is raising is the interest rate which they charge to loan money to other banks. This in turn raises the interest rates banks charge to loan money (or pay to depositors, it’s not all bad.) 50bp is just .5%, so when they say they’re considering or will hike the rate by 50 or 75bp, they’re saying they will add .5 or .75% to the current rate. If it’s 2%, then it will be 2.5 or 2.75% after the hike.
I’m a little vague on how quickly it gets implemented, but I think it’s pretty quick. The economic impact takes a good while to materialize, but the difference in rates is almost immediate.
Latest Answers