These are the real voices of Verity employees, our members and friends, neighbors and colleagues. Get to know the people behind the credit union.

Gavin Chinn

Fed Watch

Gavin Chinn on November 25th, 2015 No Comments

So, here we are in late November 2015, having been on Fed watch for the better part of two years. But this time, it’s for reals…! Is it? I think so. Does it matter? Probably not that much. Let’s take a look back at how we got here and what the impending Fed rate hike means.


First of all, what does it mean that the Fed is going to “raise interest rates”? Does it mean your savings account rate is about to go through the roof? Well, not really. The only rate that the Fed directly controls is the fed funds rate. The fed funds rate is the rate at which banks lend to each other on an overnight basis. The loans are used by banks to maintain their reserve requirements at the Federal Reserve. Because these loans are between depository institutions and are made with deposits already held at the Fed, they are considered to be the highest quality and the lowest risk. Therefore, the fed funds rate creates the baseline for all other short term rates.


In July of 2007, the fed funds rate stood at 5.25%. As the financial crisis took hold and our economy dipped into recession, the Fed started to aggressively lower the fed funds rate. They did this to lower the cost of capital and entice companies to borrow money. The more companies borrow, the more capital is flowing and hopefully the more the economy grows. By December of 2008, it had dropped to a…

Continue Reading »