🐵 what is monetary policy?
on wednesday, the Fed announced a 0.75% rate hike after the two-day policy meeting (held regularly; 8 times a year)
what does that mean & what does that have to do with monetary policy?
Fed = America's central bank that tries to promote sustainable economic growth
one of their main methods = monetary policy
monetary policy, in a nutshell, is the Fed's way to control how much money "floats around" in the economy
the simplest way to think about this is:
if interest rates are now higher by roughly 0.75% because the Fed announced so on wednesday, people are more likely to consume a lil' less and keep the money in the bank (i.e. savings account) to reap the benefits of a higher interest rate, and on the other side, because of the higher interest rate, people are less likely to borrow money
so, overall, because of the higher interest rate, there's less money circulating around (or at least that is the hope)
the Fed doesn’t always want to raise interest rates to reduce the money supply in the economy, but these days, because of red hot inflation (highest in 40 years), the Fed has been trying to tame inflation (and we all know how that’s going… i be spending $80 to fill up my car… lol)
gotta go back to work – have a great weekend y’all!
this is my first post ever… please bear with me as i try to make this better in content, design, form, etc. this will be a learning experience for myself as well!
thank you for your patience, and always send me your questions or any suggestions you have with Ask a Wise Ape!