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5:00How a Rate Decision Actually Hits the Economy
A committee votes to raise rates by 0.25%. But the central bank cannot force a single mortgage or savings account to change. So how does that one number reach your wallet within days?
A central bank sets a policy rate (Bank Rate at the Bank of England, the federal funds target range at the Fed), but it sets a *price*, not a *law*. It cannot order a bank to charge you more on a loan. Instead it makes the cheapest, safest overnight money in the system trade at the rate it wants, and lets arbitrage drag every other rate along.
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