Federal Reserve increases in the Federal Funds rate in 2005 had little immediate impact upon the overheated housing market, because

Question

Quizplus · Accepted Answer

When the Federal Reserve increases the Federal Funds rate, it typically affects short-term interest rates, such as those on adjustable-rate mortgages. However, long-term interest rates, such as those on fixed-rate mortgages, are influenced by other factors such as inflation expectations and global economic conditions. Therefore, it is possible for long-term interest rates and short-term interest rates to move independently of each other. In this case, although the Federal Reserve increased short-term interest rates, long-term interest rates remained relatively stable, leading to minimal impact on the housing market.

Federal Reserve Increases in the Federal Funds Rate in 2005