As one of the most influential financial decision-making institutions in the world, the Federal Reserve has two major responsibilities: controlling inflation and full employment. Raising interest rates is an important means of countercyclical regulation. Specifically, when the Fed raises interest rates, it will raise the federal funds rate. The interest rate is the interest rate at which American banks lend to each other.

If this interest rate rises, the interest rate when banks lend to enterprises or individuals will also rise, which can reduce the money supply and inflation, thus cooling the economy.

On the other hand, if the interest rate is cut, the interest rate of bank lending will be reduced, the cost of borrowing money will be lower, which will stimulate enterprises and individuals to lend. Generally speaking, the overall economy will be stimulated and become more active.

By adjusting this interest rate, the Fed has achieved a goal-to maintain maximum employment and price stability in the United States. Cut interest rates when the economy is weak, inject more liquidity into the market and stimulate the economy. Raise interest rates when the economy is strong, reduce the money supply, reduce inflation and prevent the economy from overheating.

Why did the United States raise interest rates again? Because the United States is currently facing economic overheating. The so-called economic overheating means that the total social demand is greater than the total social supply, and everyone buys in buy buy, so prices rise, serious inflation occurs, labor and employment increase, and wages increase, but not as fast as the price increase.

The Fed's ideal inflation rate is around 2%, and the overall CPI annual rate in the United States recorded 8.3% in August, which was higher than expected. If inflation does not cool down quickly, the American economy may be in danger of getting out of control. Therefore, the Fed is now a little impatient, so it has adopted the practice of continuously raising interest rates sharply in the short term. It can be predicted that if the overheating of the US economy is not contained, the US will continue to raise interest rates. The above views are for reference only.

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