ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -After raising interest rates seven times last year, the Federal Reserve announced its first hike of 2023, increasing rates by a quarter of a percentage point on Feb 1. That means rates on familiar financial products like savings accounts, mortgages and credit cards may rise.

Detailed explanation-2: -This key interest rate impacts how much commercial banks charge each other for short-term loans. A higher fed funds rate means more expensive borrowing costs, which can reduce demand among banks and other financial institutions to borrow money.

Detailed explanation-3: -The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on reserve balances to 4.65 percent, effective February 2, 2023.

Detailed explanation-4: -The Federal Reserve continues to pursue efforts to stem the tide of higher inflation by slowing the economy. Since March 2022, the Fed has raised interest rates substantially while gradually reducing its asset holdings. The economy continues to maintain positive growth despite the Fed’s measures.