When most consumers hear that the Federal Reserve has raised or lowered rates, they immediately think of the prime interest rate, the one that directly affects credit cards, mortgages, student loans, and other forms of consumer borrowing. The FOMC, chaired by Alan Greenspan, sets a target for the federal funds rate, the overnight interest rate banks charge when they lend money to each other. These changes will affect the prime interest rate, the rate banks charge their best and most creditworthy customers. The stock market retreats or advances. Your savings generate higher or lower returns.
Consumer spending rises or falls.
Credit card rates increase or decrease. Unemployment goes up or down. Consumers aren't the only ones borrowing money. Businesses also borrow to expand. When interest rates go up, the economy tends to slow because it becomes more expensive to borrow money.