What the heck is The Fed and why are they raising Interest Rates?

If you listen to the radio, watch the news, or generally pay attention to the world you will have heard people talking about something called "The Fed." The Fed is The Federal Reserve Board of the United States and a hot topic right now is them raising interest rates. This topic impacts you whether you care about it or not. If you want to be able to have an intelligent conversation this weekend I suggest you read on. 

What is the Federal Reserve Board?

The Federal Reserve Board has two main duties. They oversee the Federal Reserve Banks and decide the monetary policy of the United States. Other countries have similar systems as well. What is monetary policy and why should I even care about it you may ask? It's the policies that control interest rates and inflation in order to make sure the economy stays on track and the U.S. Dollar is worth something. If we do not have people controlling this we risk prices of good skyrocketing or plummeting and either way harming the consumers (us!). That Kate Spade purse you have been coveting for $200 could all of the sudden be $350 and then you would not be happy....

Why are they raising interest rates?

The Fed reviews the US economy and different factors before making any decisions. Currently interest rates have been very low. The Fed has decided the US economy is strong enough that we can start raising interest rates again. This will help keep inflation (prices of goods) balanced.

How do they raise interest rates?

You do not just decide to raise interest rates. You have to change something to make it happen. The Fed borrows and lends securities from banks to make this happen. It is a complicated explanation so I will try and keep this simple. The most common traded security in this situation is US Treasuries. It is basically a government bond which can be bought or sold, promising money at some later date. If the Federal Reserve buys US treasuries back from the banks it will give them more cash. Therefore, they have more money to lend to consumers and can offer lower interest rates. It is pretty much supply and demand. 

Well there you have it...

That is a brief but important overview of a current hot topic in Finance. How does it affect you? Well if The Fed is trying to increase interest rates it means that borrowing money from banks will be more expensive. It is important to take that into account when you are budgeting for life, trips, and shopping needs...

Now you can shop my latest look below...

 

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Grab the blazer for work or a to dress up an outfit, currently part of the Nordstrom Sale. The dress is from Missguided and is great for a night out. These Steve Madden heels are an essential piece for me. With the nude color and simple design I wear them ALL the time. My watch is Daniel Wellington and is perfect for an everyday wear to work. The bangle on my wrist was a gift from my best friend. It is the Kate Spade Best Friend Ever bangle and I love to look down at it and feel the love. These pictures were shot on a rainy day and in those situations I just like to pull my hair back into a messy bun and add a braid for fun!

Now my favorite part about this outfit is my earrings. I found them at my favorite boutique in Baltimore called Punch! And you can shop their items online here

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