How is the Interest Rate Set and What Does It Do?

The interest rate is a key economic tool frequently discussed by politicians, economists, bankers, and other decision-makers. It’s not an arbitrary figure—it reflects a calculated approach to managing the money supply and influencing economic activity.

One reason the interest rate is often described as a "brake" or "gas pedal" for the economy is because it directly affects the cost of borrowing. Push the gas too hard—lower rates too much—and you risk overheating the economy. Apply the brakes too firmly—raise rates too high—and you risk slowing things down too much. How the rate is set, by how much, and for how long are all central points of debate.

In general, lowering interest rates increases the money supply, making borrowing cheaper and usually accelerating economic activity. Raising rates restricts the money supply, making borrowing more expensive and slowing the economy.

Modern economic policy aims to find a “sweet spot” that supports steady, sustainable growth. Interest rates are determined by a group of experts—typically central bankers—who assess economic conditions and reach a consensus on the appropriate rate. The Federal Reserve Rate is chosen be the Federal Reserve Open Market Committe (FOMC).

You may want to look at the posted interest rates. Posted Interest Rates Federal Reserve

In depth article of Interest Rate

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How Do Interest Rates Work?