What is the Federal Reserve?

Before understanding the concept and impact of the Federal Reserve's interest rate hikes and cuts, we first need to know what the Federal Reserve is. The Federal Reserve (Federal Reserve), also known as the Federal Reserve Board of the United States, is the central banking system of the United States, consisting of 12 regional Federal Reserve Banks. Its goal is to stabilize prices and maximize employment by regulating monetary policy. Indicators such as inflation and employment rates are crucial to economic health, and they are also indicators that investors and market participants pay close attention to to judge economic prospects and investment risks. Therefore, as the central bank of the United States, the Federal Reserve has a huge influence on the financial market. So how does the Federal Reserve exert its influence? It is because it mainly affects the economy by adjusting interest rates through the following monetary policy tools, that is, raising or lowering interest rates: Raising interest rates means raising the cost of borrowing between banks, thereby raising the interest rates of commercial banks' loans to businesses and individuals: When the Federal Reserve raises interest rates, the deposit interest rate of the US dollar rises, and depositors receive higher interest income, resulting in capital inflows into the United States, reducing investment in other countries, worsening the economic environment, and rising unemployment. High interest rates also increase borrowing costs, leading to an increased risk of default for businesses and individuals, which may trigger corporate bankruptcy. Lowering interest rates, on the contrary, will reduce deposit rates and borrowing costs: when the Fed cuts interest rates, the US dollar deposit rate falls, capital flows out of banks and flows to other countries, promoting global investment and economic recovery. #内容挖矿