Federal Reserve and the Changes in Interest Rates

Changes in Interest Rates
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Changes in Interest Rates
Expectation of Interest Rates after the New Year
The future of interest rates will be profoundly affected by the high inflation and robust economic expansion that the world anticipates. This effect will happen as the economy improves and inflation rises, and interest rates often go up (Nakata et al., 2020). With the economy expanding rapidly, more people and organizations will need access to credit to finance new endeavors and take advantage of emerging opportunities. Society can expect a higher interest rate due to the greater need for credit and increased competition for loans (Nakata et al., 2020). Federal Reserve banks will similarly increase interest rates to shrink the money supply and rein in inflation in the face of an anticipated high inflation rate. This conduct is due to prolonged high inflation that can decline the currency's purchasing power and hence a shaky economy.
The Way Interest Rates will Move and Why the Federal Reserve Changes Interest Rates (or Adjusts the Discount Rate)
To achieve its monetary policy objectives of price stability, maximum employment, and sustained economic growth, the Federal Reserve modifies interest rates or the discount rate. The Federal Reserve changes interest rates to bring inflation closer to its target level, whether too high or too low (Blanchard, 2019). Similarly, the Federal Reserve will change interest rates to either stimulate or cool the economy, depending on whether there is an economic slowdown or excessive growth.
Hence, depending on the economy and the market...