I learned that low fed interest rates makes ppl borrow more, stimulating economy as money circulation is higher. why ever increase it then, if increasing it worsens the econ?
Also ,is the fed reserve actually the goveernment bank? heard it was still a giant private bank and the goverment has nothing to do with it
In: Economics
Lowering interest rates is an accelerator for the economy.
If you just keep pouring on the gas, the economy overheats and bad things start to happen. The main bad thing that the Fed is concerned with is inflation.
We also want to have some gas in the tank when we really need it, rather than just running pedal to the metal all the time. We’d like to be able to press the accelerator further when the economy is slowing down, but you can’t cut rates forever. The fed tends to increase rates when the economy is strong, and lower rates when the economy is weak.
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