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Federal Fund Rate Increase Frequently Asked Questions Q: Why is the Federal Reserve Fund (the Fed) raising rates again? A: Since the financial crisis of 2008, job growth has been steadily increasing and unemployment rates have fallen below 5%. This is an indicator of a growing economy. With modest rate adjustments, the Fed wants to moderate growth to attain and maintain a healthy rate of inflation. Q: What does an increase in the federal fund rate mean to consumers? A: Although the Federal Reserve has no direct role in setting the prime rate, many financial institutions choose to set their prime rates based partly on the federal fund rate. The Wall Street Journal prime rate is the most widely used index by financial institutions to set rates on many consumer loan products like credit cards, home equity loans and lines of credit, and auto and personal loans. Therefore, with this increase to the federal fund rate, consumers will see an increase in their variable rate loan products that are indexed by the prime rate. Q: What is prime rate? A: Prime rate is the interest rate that banks charge their most credit-worthy customers, typically large corporations. The prime interest rate, or prime lending rate, is heavily influenced by the federal fund rate, which is the overnight rate banks lend to one another. Q: What is the Wall Street Journal prime rate and how is it calculated? A: The Wall Street Journal surveys the prime rate that large commercial banks are charging and publishes a consensus prime. When three-quarters of surveyed banks change their prime rate, the Wall Street Journal publishes a new consensus rate. Q: How are effective dates of rate changes determined on SchoolsFirst FCU products? A: Each of our variable rate products that are tied to the prime rate have specific disclosures about the effective date of a rate change depending on when the Wall Street Journal publishes a change in prime. This information can be found in disclosures received upon account opening or on our website. Q: Does this mean we will also be increasing rates on deposit products? A: We always strive to maintain very competitive rates to help Members save. The fed fund rate is just one factor we consider when determining if we will increase deposit rates. You can find our most recent share certificate rates on our website at schoolsfirstfcu.org/sharecertificate.