Thread by @RagingBetr

#FOMC - ALL YOU NEED TO KNOW:

Have you ever wondered what the Federal Funds Rate is and how it affects the economy?

Let's break it down in simple terms. 🌟 (1/11)

1️⃣ Banks rely on deposits from customers to lend money to others.
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2️⃣ To ensure stability, regulators require banks to keep a portion of their money in reserve.
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3️⃣ Banks' reserve requirements change daily due to deposits, withdrawals, and loans.
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4️⃣ Sometimes, banks need to borrow money overnight from each other to meet these requirements or to lend out their excess reserves. 🏦💸
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Enter the Federal Funds Rate!

It's a benchmark rate set by the Federal Open Markets Committee (FOMC) that guides these overnight borrowings and lendings. 💡

But why does it matter? Let's zoom out and see the bigger picture. 🌍
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The Federal Reserve has two main objectives:

1️⃣ Keep prices stable (controlling inflation).

2️⃣ Support maximum employment.
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Here's how the Federal Funds Rate comes into play: (8/11)

1️⃣ When the Fed raises the rate, it makes borrowing money more expensive.

This reduces the supply of credit and can help lower inflation. However, it may also lead to increased unemployment. ⬆️🔽
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2️⃣ On the other hand, when the rate is lowered, it becomes cheaper to borrow money. T

his stimulates economic growth, as companies can expand and hire more easily. But if the rate stays low for too long, it could potentially lead to inflation. ⬇️📈
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Finding the right balance is crucial for the Federal Reserve to maintain stable prices & support employment.

The Fed Funds Rate plays a significant role in shaping the credit market and influencing the overall economy.

Follow @RagingBetr for more threads like this!💼💰
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