How Interest Rates Affect the Market

Investors should observe the Federal Reserve’s funds rate, which is the cost banks pay to borrow from Federal Reserve banks.

[yewgiafung]

based on my understanding, if fed rate hike continously, bond yield will drop as coupon payout is fixed based on contract sold, bond price will up due to attract more people for buying bond. Conclusion is, if fed hike rate, saving retiment portfolio like long term treasury bond will not be recommend because highly affected by fed rate hike, should go for liquidity short term or middle term bond. Same for stock, if u hold some of like small cap domestic US equity for long period, definitely profit is not as attractive due to high cost of borrowing. overall, fed rate high is depend on inflation and make US Dollar getting strong in the market.

[owenzhang]

I thought the fed funds rate was the rate banks borrow from each other. When the video said, "the rate that banks borrow from the Fed's banks, " did it mean banks that are insured by the FDIC? I was a bit confused about that.

[JQ]

I'm a bit confused. I thought price of bond and interest rate are inversely correlated.

[Josephus_vanDenElzen]

1:07 owning stocks become more risky? While stock prices have fallen?

Can anyone explain?

[SKPProduction]

so banks are paying the fed even if they dont need to borrow any? so its like a membership for the fed that provides for the bank?

[yoelwasserman]

I understand this, but what do they mean when they say that there is a selloff on bonds, and that because of this bonds are at present not a safe haven, nor are stocks? I've read this said a number of times in opinion pieces, that the bond bull market is ending, but I don't understand what it means.

[hudsoncaceres]

Why would inflation lead to banks borrowing less from the federal reserve? Or is that not what it is saying?

[soubhadra]

good short and precise explanation. Thanks

[bryanhatchell]

Ok, I'm glad everyone else thought that was way to fast lol.

[erdaddy]

I don't see the advantage to ever increasing the interest rate. Let's look at the pros and cons of increasing the interest rate: Pro: Inflation reduces (or slows). Cons: Increased interest payments for the average Joe, less investment return, job loss, recession. So the average Joe with a mortgage loses an extra $60 a month. So the theory here is that overall, since inflation is slowed, paying the $60 a month is okay because the rest of their money goes further because goods cost less. Now let's say we kept the interest rate low, what would happen: Pro: Average Joe pays less interest so he has more money to spend, so economy keeps growing, increased employment, increased return on investments. Con: Increased inflation. Despite inflation, Average Joe is saving $60 month in interest, making more on his investments, and there are more average Joes working because the economy is growing. So it's basically a wash. But the difference is here, if Joe is unhappy with inflation, he can cut back on his spending or buy cheap noodles to eat for a week, but at the end of the day, he can control this side of his finances. He cannot control what he pays in interest to the bank. Plus, in general, if the economy is still growing, then companies are investing in new technology to sell higher quality food at lower prices and Joe's standard of living is rising. I feel like keeping the interest rate low is way better overall for the average Joe. I don't claim to be an economist and so maybe I'm way off with everything, so please enlighten me, what am I missing in this picture?

[praytotheonlygod]

4 sins cause greatest corruption to human soul&earth: uncurable diseases, plagues, disasters, ingnorance, extremism, crimes, etc. For doers of these four sins, God promised (in Quran) eternal hellfire:

1-Worshipping another deity with God

2-Killing human without right

3-Fornication&Adultery

4-Habit of taking Usuary (interest on loans)

Except who believes, repents, and does righteous.

O humans, pray for forgiveness, repent to yr only God, and worship him by standing against major sins to prosper to knowledge, global peace of mind, and eternal heaven.

[praytotheonlygod]

God forbids taking interest on loans.

God promised to curse interest taken money by rich greedy people, on the other hand, God promised to bless charity given to the needy.

God promised eternal hellfire for such greedy people who are used to eat usuary.

O humans, fear yr only God, &return to him in sincere repentance before you face him in the judgement day and say: O lord please let me go back to give charity and become righteous, but he will say: No.

[praytotheonlygod]

4 sins cause greatest corruption to human soul&earth, for such, God promised (in Quran) eternal hellfire in judgement day:

1-Worshipping another deity with God

2-Murder

3-Adultery

4-Habit of Eating Usuary/Interest