Federal Reserve Interest Rate Hike and Muted Effect on the Markets

The term Federal Interest Rate refers to the target interest rate set by the Federal Reserve Committee (FOMC). This target rate is the interest rate at which commercial banks lend and borrow their excess reserves from each other overnight. The FOMC, the policy-making body of the Federal Reserve System, meets eight times a year to set the target federal funds rate, which is part of monetary policy. It is used to encourage economic growth.

The Federal Reserve’s interest rate was released at 7:00 p.m. on December 14 at 4.50%, which was in line with expectations. It should also be noted that the value for the previous period was 4.0%.

Despite the increase in the interest rate of the Federal Reserve by 0.5%, no change was observed in the markets, and it can be said that the announcement of the interest rate did not affect the market.