Understanding the Impact of Interest Rates on the Economy

Interest rates are crucial for the economy, determining the amount of money received from bank accounts, mortgages, credit cards, and auto loans. They also dictate how much money companies and the government must pay to finance their borrowing, with the federal government`s debt totaling $35 trillion. The Federal Reserve raised interest rates by 5.25 percentage points from March 2022 through July 2023, bringing the federal funds rate target to 5.25% to 5.50%. Investors are looking forward to Fed rate cuts as inflation and the economy slow. Interest-rate futures indicate a 100% chance the Fed will trim rates by September, with a 97.6% chance of at least two rate cuts by December. The U.S. Treasury can influence rates through bond auction timing and maturities.