In This Economy?

Why the Federal Reserve Changes Interest Rates

| May 1, 2023
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    In This Economy?

    Why the Federal Reserve Changes Interest Rates

    May 1, 2023
    The Federal Reserve's primary function is to, "promote maximum employment, stable prices, and moderate long-term interest rates," per their website's mission statement. The Fed tends to raise interest rates when inflation is high and cut rates when the economy shows low inflation - the long-term inflation target is 2%. Changes to interest rates affect how consumers and businesses spend, creating times of growth and contraction. Frank explains the overall economic cycle around the Fed and interest rates and how markets tend to act at various points in the cycle.

    Correlation measures how likely two markets' prices are to move in the same or opposing direction on a scale of -1 to +1. Commodities like gold and crude oil often show strong correlations to markets like stocks, forex, and bonds. Frank crunches the numbers on correlation between major markets before giving examples of potential pairs trades that could lower risk next time you trade a commodity market.

    Also, Frank highlights the three major events in this week's economic calendar - FOMC meeting, ECB meeting, and Nonfarm Payrolls.

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