How does the Fed technically raise interest rates?
Question by something: How does the Fed technically raise interest rates?
I am cognizant of how the Fed lowers interest rates. The Fed prints more money, due to liquidity of capital in the system treasury bond yields are lower and the bonds cost more thus ideally leading to inflation if need be. But hypothetically if the economy is facing hyperinflation how does the Fed go about increasing interest rates, so that money is worth more lowering the prices of goods, commodities, etc. Does it just increase the reserve Federal Reserve rate for banks thus there is less capital in the system or is there another method. I am positive I know and comprehend the methodology but am having slight trouble putting it together cognitively.
Best answer:
Answer by SDD
The Fed sells bonds on the open market, which takes cash out of the economy. Reduced quantity of money=higher interest rates.
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Tags: interest rates, rates, treasury bond yields <BR/>
