Reasons for the Fed to raise interest rates: After the Fed raises the interbank lending market interest rate, the cost for other financial institutions to borrow money from the Fed will increase.

First of all, the Fed's interest rate hike means that the overall interest rate level in the United States will rise. The Fed's interest rate hike is not the deposit and loan interest rate that we usually contact the most, but the interest rate of the Fed in the interbank lending market, which is called the federal funds rate, which is equivalent to the benchmark interest rate of other interest rates.

meaning

As the Federal Reserve is the largest participant in the interbank lending market, the financing it provides will occupy a large proportion in other financial institutions, and the increase in financing costs is difficult to digest by itself and can only be passed on to others, so the financing interest rates provided by these financial institutions will also rise. As a result, the interest rate of the whole market will rise.

Second, the Fed's interest rate hike means that inflation in the United States has not been effectively controlled. The reason why the Fed wants to raise interest rates is generally because inflation in the United States is too high. Because raising interest rates can encourage residents to save more and consume less, it can also curb financing and loans, thus curbing investment and consumption. When investment and consumption are restrained, it will help to reduce inflation.