finance
Federal Reserve
The Federal Reserve, or the Fed, is the central bank of the United States. It influences the money supply and interest rates through tools such as setting the federal funds rate target, the discount rate, reserve requirements, and open market operations like buying and selling government securities. Its policies affect mortgage rates and the availability of credit, though it does not directly set mortgage rates.
- Exam tip
- Know the Fed's tools: discount rate, reserve requirements, and open market operations. Tightening the money supply generally pushes interest rates up.
- Example
- When the Fed raises its target rate to fight inflation, borrowing costs rise, and mortgage rates in the market tend to climb, cooling buyer demand.
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Last verified: 2026-10-23