Most people want to be an investor

But most investors don't know understand how interest rates control inflation

Here's how interest rates control inflation:

1/ Raising interest rates can send a shockwave throughout the whole economy.

It can sink consumer confidence, result in fewer jobs, and tank stock prices.

If the Fed goes to fast, it will send the economy into a recession.

So why would they even raise interest rates?

2/ Let's start with the basics

If you borrow money, you will have to pay back a little extra (interest) to make it worth while for the bank.

If you save money, you will be given money (interest) as a reward for keeping money in the bank.

3/ The size of your reward depends on the state of the economy

There is no single interest rate in the economy. You have thousands of commercial banks setting their own interest rate for their customers.

This is all influenced by the central bank (Federal Reserve)

4/ What do Central Banks do?

A central bank is like a bank for banks.

Banks have reserves which is essentially their cash on hand.

Banks can earn interest when they leave their excess reserves with the central bank.