The Federal Reserve has met and told the world that it is not raising rates this month but it intends to do so 2 more times this year. And if you really know what the Fed will do, you are ahead of the majority of the market. So what exactly does the Fed do and how does it impact the market? The Federal Reserve sets the overnight lending rate between banks. That rate has been set to zero percent from 2008 all the way though December of 2015 when it was raised by a quarter percent. Why does this matter? Some other rates are adjusted based on what the Federal Funds Rate is, such as prime. Prime rate is basically whatever the federal funds rate is plus three and a quarter percent. Currently it is at 3.5%, it is supposedly the rate which banks will give their best borrowers.
About 7 years ago during the tumults of the great recession, I was in the market for a new car for my wife. She is a better person than I am, and so she was looking for an environmentally conscious choice. We were living in Brooklyn, NY at that time and were sharing one vehicle as we both needed a car for work. We decided that it was the right time to purchase a car.