Why do rates matter?

The Federal Reserve is widely expected to raise its benchmark interest rate this week for the first time in nearly a decade, marking the end of the central bank’s emergency response to the financial crisis but raising new questions about its next steps.
 
The Fed dove into uncharted territory in 2008 when it took its target interest rate all the way to zero as the country slid into recession. It experimented with unconventional ways to stimulate the economy, pumping roughly $3.5 trillion into the recovery to boost the flagging economy.
 
Now, financial markets are all but certain that the Fed is ready to start pulling back. Odds of an increase in the Fed’s target rate when the its top brass meet in Washington this week have topped 80 percent. Fed Chair Janet Yellen said earlier this month that she sees the risks to the Fed’s economic outlook as “very close to balanced” -- which many analysts see as code for a rate hike. The Fed is expected to announce it decision on Wednesday afternoon.

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