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What happens when the Federal Reserve raises interest rates?

While higher interest rates might not be good for borrowers, they're great for savers.

CHARLOTTE, N.C. — What happens when the Fed raises interest rates?

Let's connect the dots.  

The Federal Reserve's mission is to keep the US economy going. So when inflation or a "bubble" happens, they step in and raise interest rates to help cool down the economy.  

That makes loans more expensive for people and businesses, so more people postpone projects that involve financing.  

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It also causes car and private student loans to change, making it cost more to pay back debt or buy a new car. But it does help reduce the supply of money in circulation, which can help lower inflation.  

And there is a bit of good news.  

While higher interest rates might not be good for borrowers, they're great for savers. When the Fed raises rates, banks increase the amount you earn from your account.  

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