In the early hours of September 22nd Beijing time, the much-anticipated Federal Reserve's September interest rate meeting concluded, with the Fed announcing a 75-basis-point increase in the target range for the federal funds rate to3.00%～3.25%; and hinted that it would continue to raise rates until the federal funds rate reaches 4.6% next year.
Following the Fed’s announcement, the US dollar and US Treasury yields climbed, while the three major US stock indexes initially rose before falling, indicating significant divergence between bulls and bears. Subsequently, most global stock markets followed with declines today.
As everyone knows, every move by the Federal Reserve affects global capital markets; many domestic media reporters and institutional researchers stay up late to await each interest rate decision.
So, what exactly is the Federal Reserve – an institution so large and intricate in design that even many Americans don’t fully understand its operational mechanisms?
What does the Fed raise when it raises rates? And what’s this often-heard 'dot plot' of interest rates about?
Why does the Fed raise interest rates? Can rate hikes curb inflation?
How do Federal Reserve rate hikes influence global capital markets?
Next, we will address the above questions one by one. First, let's understand what kind of organization the mysterious Federal Reserve is.
1. Organizational Structure of the Federal Reserve
The Federal Reserve, fully named the Federal Reserve System, performs the functions of the central bank of the United States, such as formulating monetary policy and supervising financial institutions in the U.S.
The Federal Reserve is not just a government agency; it is located in Washington D.C., United States, and includes theFederal Reserve Boardand12 regional banks distributed across the country...