{"id":17798,"date":"2025-09-04T11:59:44","date_gmt":"2025-09-04T18:59:44","guid":{"rendered":"https:\/\/canary.kcprod.info/blog\/?p=17798"},"modified":"2025-09-04T11:59:46","modified_gmt":"2025-09-04T18:59:46","slug":"fed-funds-rate-increase-decrease","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/fed-funds-rate-increase-decrease\/","title":{"rendered":"Why Does the Fed Raise or Lower Interest Rates?"},"content":{"rendered":"\n

When the Federal Open Market Committee (FOMC, or the \u201cFed\u201d) meets to weigh changing the federal funds rate, as it does eight times each year, the resulting decision invariably makes headlines. That\u2019s because the federal funds rate (or the rate at which banks loan money to one another) can have big implications for financial markets and individual consumers. Whether the federal funds rate goes up, down, or stays the same, these choices can impact the cost of borrowing money and the amount you earn on your savings. But why<\/em> does the Fed decide to raise or lower interest rates?<\/p>\n\n\n\n

In this post, I\u2019ll break down what you need to know.\u00a0<\/p>\n\n\n\n

It\u2019s about the dual mandate<\/h2>\n\n\n\n

The most important thing to know about the Fed is that they have a \u201cdual mandate\u201d to keep prices stable and encourage maximum employment.<\/strong> These are the Fed\u2019s two main objectives, meaning they work hard to ensure that the country avoids both high inflation and<\/em> high unemployment\u2014both of which can put significant strain on Americans.<\/p>\n\n\n\n

Mary C. Daly, president and CEO of the Federal Reserve Bank of San Francisco described growing up during a period of high inflation in the 1970s in a speech<\/a> at Boise State University in 2022. She explained the challenges high prices posed, even for those who were employed. \u201cThe enduring lesson of my childhood is that people need both jobs and stable prices. That is why the dual mandate is not a choice between two desirable things. It is a balance meant to deliver on a singular goal\u2014a sustainable and expanding economy that works for everyone.\u201d\u00a0<\/p>\n\n\n\n

When the FOMC decides whether to raise, lower, or hold the federal funds rate, it\u2019s in an attempt to deliver on this dual mandate.\u00a0<\/p>\n\n\n\n

Why the FOMC raises and lowers the federal funds rate<\/h2>\n\n\n\n