Interest rates

Interest rates, interest rates, interest rates! Why do they matter? Well many investors concern themselves with interest rates because the supply of money is dependent upon them. So when the fed (the federal reserve) raises rates, money is more expensive. What does that mean? Simply put, its more expensive to borrow money. Raising rates can be both good and bad. Raising rates has a positive effect on the economy because it shows the fed's confidence in the economy. Basically they see that the market can handle the increase and this also deters inflation. A negative side to raising rates would be the obvious of more expensive loans, but it can also be raised too soon and limit the supply of money. Typically rates are raised when an economy is doing very well... almost too well. So they raise the rates to control growth as not to let it get too big where it can't stand on its own weight. In future posts we'll cover interest rates more in depth and the effect on our current economic situation! Join me for more market gems!