The Federal Reserve has two mandates: price stability (target ~2% inflation) and maximum employment. These goals often pull in opposite directions, and the Fed's main tool — the federal funds rate — is the most important price in the global economy. Every DCF, bond, and mortgage rate ultimately traces back to it.

Real Rate ≈ Nominal Rate − Inflation (Fisher equation). If your savings account pays 5.25% but inflation is 3%, your real return is ~2.25% — you're growing richer, but only modestly. For bond investors: if a Treasury yields 4% but inflation runs 5%, the real return is −1% — you're losing purchasing power despite receiving interest. This is why inflation expectations drive long-term bond prices.