What does it mean when the Fed raises interest rates?

When the Federal Reserve (the Fed) raises interest rates in finance, it means that the central bank is increasing the cost of borrowing money for banks and financial institutions. This is done to control inflation and stabilize the economy. When interest rates are raised, borrowing becomes more expensive, which can lead to a decrease in consumer spending and business investment. This, in turn, can slow down economic growth and reduce inflationary pressures. Raising interest rates can also have an impact on the stock market, as higher borrowing costs can lead to lower corporate profits and reduced stock prices. However, higher interest rates can also benefit savers and investors who earn higher returns on their savings and investments. It can also strengthen the value of the currency and make imports cheaper. Overall, the decision to raise interest rates is a carefully considered one, as it can have wide-ranging effects on the economy, financial markets, and individual consumers and businesses.