Nicole Lapin

Right now, the Fed is in the middle of one of the most important transitions in decades.

There's a new chair, there's rising inflation, a divided committee, and an upcoming meeting that has Wall Street's full attention.

The Federal Reserve is, of course, the central bank of the United States.

It's not where we bank at.

It's a government thing.

But even so, it definitely impacts our financial lives.

So I'm going to untangle how this upcoming meeting is going to impact your wallet and how the market most likely will behave.

Now, the reason the Fed is always in the headlines is because of the federal funds rate.

Here's how this comes up.

And it's also a kind of cool look into how banks actually work.

I mean,

I think it's cool, but I am a nerd.

Anyway, banks need a certain amount of money in their reserves.

That makes sense.

When banks lend money throughout the day, their cash balances fluctuate.

So by the end of the day, some banks might find themselves slightly short on their reserve requirements.

So rather than scramble to try and fix a shortfall, they just borrow overnight from other banks that happen to have excess reserves that day.

And when they borrow, they borrow at...

the federal funds rate.

So basically, this is the rate that banks charge other banks.