Question

When banks borrow money from a federal reserve bank, they are given a certain interest rate to pay back the loan. if the federal reserve system raises the rate of interest, the banks will find it:?

Answer 1

Much more expensive to borrow the money. They make loans in at least the 100 million range and interest is a big cost of doing business. Interest rates go up, so does the cost of money needed to be borrowed. That's a real expense for a bank. It is even a large expense for a home homeowner.