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
So many good answers here.
I’ll add one thing.
Right now, banks are flush with cash and were lending it out very liberally. The FED would like to slow that down to stop inflation and make the economy slow down.
I tell my students the economy is like a car, and the car is overheating right now.
So when the FED “raises interest rates” one thing they are doing is paying private banks (like PNC or Chase) to keep money at the FED instead of lending it out. This is called “Interest On Reserve Balances.”
Now banks have to decided if they want to loan money to you at 5% which is a little risky (just a little, I’m sure) or put it in the FED for 1%, which is super safe.
This is all a bit new for the US.
[Here is a little graph](https://fred.stlouisfed.org/series/IORB)
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