Put simply, the interest rate is the cost you pay when using other people's money, the household understand this better than anyone. By mortgages, they borrow from the bank and used the money to buy a house, buy a car ... This is the same for those who use a credit card, they borrow money in the short term to meet the need bridge shopping. But when it comes to interest rates for the stock market, we have much to learn, rather than the simple example above.
The level of interest rates applied to interest investors are put off by the Fed, this is the cost at which banks pay for borrowing money from the Fed. Why this number is extremely important? Here is how the Fed uses to control inflation, inflation is the reason why you have to pay a lot of money to get a certain basic goods (or larger demand than supply), what makes prices rise. By controlling the amount of money in public Fed could control inflation. Federal Reserve monetary policy implemented mainly by orientation "in the Fed funds rate." This is the rate banks set together for overnight loans at the Fed funds deposited. This rate market by Fed decisions but not forced. However, the Fed will try to influence this percentage figure in accordance with the desired rate by adding or restrict the money supply through its activities in the market.
Federal Reserve also press the discount rate - the interest rate that commercial banks to borrow money from the Fed. However, banks often choose to borrow funds from the Fed deposit at another bank, although the interest rate is higher than the Fed's discount rate. The reason for this choice is the way to borrow money from the Fed brought widespread publicity, it will be brought to the public's attention on the liquidity and the confidence level of the banks are borrowing.
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