In effect, raising the federal funds rate in U.S. monetary policy.
A rate hike is generally the act of raising interest rates in a country.
In this way, commercial banks’ lending rate to the central bank will be higher, which will increase the cost of commercial banks’ borrowing from the central bank.
This will result in higher interest rates for individuals and businesses on loans to commercial banks.
On the other hand, interest on personal savings will increase.
The ultimate goal of raising interest rates is to reduce, and thus curb, consumption and inflation;
At the same time, it can encourage savings and reduce market speculation.
Another important function of higher interest rates is that they can serve as an indirect means of strengthening the exchange rate of the domestic currency.
In general, if monetary policy is in a relatively loose environment, it will not be easy to raise interest rates.
