I see economists talk about it all the time, But I don’t understand it..
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Banks borrow money and often that is to then lend to the consumer market.
You’re the consumer market. Anything you borrow has an interest rate where they make money from you paying back your loan debt ect.
The Fed is who lends to Banks and by raising their interest rates charged to banks, they increase the costs of the banks when they lend to you. So you’ll see higher interest rates. This means you’re less likely to borrow or will borrow less (as a consumer group)
In general it makes money more expensive (if you’re borrowing) which is being done to reduce demand in the market, “cooling it” to combat inflation.
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