What makes the Federal Reserve decide to raise or lower interest rates? - Chase Bank

When the Federal Reserve decides to raise or lower the federal funds rate, it makes headlines – and for good reason. Even small rate adjustments affect the cost and availability of credit, sending ripples through the country’s larger economy. But why does the Federal Reserve cut or hike interest rates in the first place? Read on for a full breakdown, including how the federal funds rate functions as a powerful lever in the U.S. economy. The Federal Reserve (Fed) is the central bank of the United States . Established in 1913 through the Federal Reserve Act, it comprises 12 Federal Reserve Banks, the Federal Reserve Board of Governors and the Federal Open Market Committee (FOMC).