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Economics

Monetary Transmission Through Bank Lending Channels

Quick fact

When the Federal Reserve raises its benchmark interest rate, banks often raise the interest rates they charge on loans. This can reduce the number of loans they can make, slowing down consumer spending and business investment.

Why this is interesting

Think of the economy as a heart, and banks are the arteries that deliver credit to every part. What happens when the central bank turns the pacemaker up or down?