How Interest Rates Are Set: The Fed's New Tools Explained

The Federal Reserve has kept interest rates at near zero since the 2008 financial crisis. To raise them, it has come up with a new set of tools. A WSJ explainer.

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[erikcarter]

I feel like most metaphors people come up with confuse me more than they have to

[sxavathi]

I think there are other ways to explain this process in a simpler way.

[Paul-A]

I've got a bad feeling about this

[mdeezy]

I'm not the highest grade of weed in the dispensary, but that still confused the shit out of smh

[Playboysmurf]

Super low interest rates are a disaster for younger generations.

They just makes the capital cost of everything higher, effective repayments lower and length to pay off longer.

But the risks are sky high in that one day rates will return to normal and home prices will crash along with stockmarkets and valuations of almost everything.

[anarchyseeds]

that's a scam if I've ever seen one

[ImyManzProductions]

Lesson - if you save money, the Fed steals from you through inflation at will.

[johnboutakis]

Where does the money come from to pay the interest on the principle when only the principle is printed ? The interest is not printed, it's a MASSIVE SCAM just like taxation is theft.

[zaiks]

Actually, info presented in this video is misleading and outright wrong for some parts. Only some parts are correct here.
- For once, it doesn't have Discount Rate
- It misleads you to think that big banks and home loan banks are 2 classes. They are not. Feds do distinguish between different sizes of banks but not this way
- IOER is depicted as the upper bound. It is plain wrong. It also doesn't distinguish between IOER and interest on (required) reserves

I understand it was uploaded back in 2015 but WSJ NEEDs to update it.

[SCPRblx]

I don’t get how the comments say this is confusing. This analogy made perfect sense to me. In fact, it’s a brilliant analogy.

[RWAfuture]

Today it's not about return ON capital. Today it is about return OF capital.

[cancelled_user]

Oh, It's just 5 am and I'm just having my coffee.... I still somehow don't get it. I'll try to watch again in the evening :-)

[travelspurs]

Good to find that everyone finds it tough

[chrisdt]

The federal reserve lowers interests rates for a couple of years so everyone can get loans with 0% apr, then they increase the interest rates which also in turn makes people stop taking out loans, the federal reserve collects all the money from the loans and lowers the money supply which increases the value of the dollar but the loans are still the same. Then causes a financial crisis by making people default on loans they cant afford because the dollar is worth more

[Willaras]

"New economic era" Brace for impact..

[thatwasprettyneat]

this video was interesting but you lost me when you introduced the fourth building. why would the home loan building need to be coaxed into lending at a higher interest rate? that's what anyone would obviously want to do.

[Stratigic_Cheese_Reserve]

The fact that he didn't use the Big Bank/ Home loan as plurals bothered me on some deep level.

[douchenozzle]

why does home loan accept lower interest rates? why don't they just set the interest rate to maximum below IOER?

[omarperezrodriguez]

Just abolished the Fed so we don't have to deal with this mess

[Shogun-mync]

Why wouldn’t home loan be willing to accept a rate higher than 0.25%?