when key rates increase the cost of consumer borrowing increases causing consumers to save more and spend less therefore causing the economy to contract lowering key rates will lower the cost of borrowing and cause a decrease in saving and an increase in spending expanding the economy 
types of key ratesthe fed funds rate is the rate that banks charge each other on loans used to meet their reserve requirements this rate governs the overnight lending of funds made available to private sector banks credit unions and other loan institutions if a bank decides to borrow directly from the federal reserve it is charged the discount rate the federal reserve sets the discount rate if the discount rate is increased banks are reluctant to borrow given that the cost of borrowing has been set higher in this situation banks will build up reserves and lend less money to individuals and businesses on the other hand if the fed reduces the discount rate the cost of borrowing will be cheaper for banks leading them to lend more money out and to borrow more funds to meet their reserve requirements 