Interest rates correlate strongly with treasury yields. https://en.macromicro.me/charts/762/us-fed-funds-rate-treasury-bonds-rate https://en.macromicro.me/chart

Interest rates correlate strongly with treasury yields. https://en.macromicro.me/charts/762/us-fed-funds-rate-treasury-bonds-rate https://en.macromicro.me/charts/762/us-fed-funds-rate-treasu... To increase the federal funds rate the fed has to sell treasuries (pushing up coupon rate, which is government interest payments), or pay banks interest on reserves (give banks money), or buy assets from banks (give banks money). So from every angle, the government is creating money when it increases funds rate. https://www.stlouisfed.org/open-vault/2020/august/how-does-fed-influence-interest-rates-using-new-tools https://www.stlouisfed.org/open-vault/2020/august/how-does-f... If we zoom out, the two ways the Fed increases the rate is by giving banks free money, or pushing up bond prices (and the interest on bonds comes from new money). Despite the enormous complexity of monetary policy, the only actual tool the Fed has underlying everything is the ability to print money.