Fed Hike or Fed Rate Hike are just the anonyms . To understand this, first we have to break it in parts :- * Fed ~ Federal (Fed) Reserve Bank is the central bank of America. * Rate ~ It signifies the interest rate charge by the banks. * Hike ~ It means increase (of interest rate). Only meaning is not enough unless you understand on what basis Fed raises rates, why they do, how rates are decided & so on. So, lets train in a summarized manner :) Pic Credit - CNN Money ⇛What is Federal Rate or Federal Fund Rate ? It is the interest rate charged by depository institutions (say Banks) from other banks. But only when they borrow/lend money to each other overnight , or without any collateral (security). ⇛ What is Federal Funds ? Federal Funds are those funds which are deposited by the banks with the Federal Reserve to meet 'Bank Reserve Requirements' (In India, it is known as ' Cash Reserve Ratio '). Generally, it is a percentage of depo...
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