> It only sets the prime interest rate, which affects the ability of people to borrow money (specifically does it affect ARM mortgages) It's even less than tha

> It only sets the prime interest rate, which affects the ability of people to borrow money (specifically does it affect ARM mortgages) It's even less than that. The Fed targets the Fed Funds Rate, which is the rate at which banks lend to each other overnight. ARMs are not based on overnight rates, but rather on rates of debt of duration of 1,5,7,10 yrs etc. (Granted the overnight rate may pull down the short end of the yield curve, but not necessarily.)