Especially regarding mortgage rates- folks are paying huge increases in monthly payments.
I’m assuming “to the government” but does it just get held somewhere?
In: 67
The Federal Fund Rate that the Fed targets is the rate that banks lend to each other. So the answer is, the banks lending the money to other banks.
Since the loans between banks are basically perfectly guaranteed to be paid back, this is risk-free and generally lowest possible market rate for any loan, since why would a bank ever make a riskier loan at a interest rate lower than a risk-free loan?
Because of this when ever the Fed increases the Federal Funds Rate, all other loan rates tend to go up so that they remain competitive. If those loans didn’t go up, banks would make fewer of them in favor of less risky loans that are now paying higher interest rates.
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