What is the reason for increasing or lowering interest rates?

Question

How does that affect business, the economy and personal finances? And can this really be dictated by a single person like
Greenspan before his new successor? (what's the name of the new guy again?)

Answer 1

Bernanke is the new guy.

The reason controlling interest rates works is because it controls the flow of money.

If I offered to sell you water at $0.01/gal you probably wouldn't think anything of washing your car. Now let's say I charged you $2/gal, now you might think twice about taking a long bath or even washing your hands.

By changing the cost of water I just made the supply less appealing and thus less water is flowing. Same with money.

Interest is basically the cost of using money. When people refer to free money they usually mean money with zero interest or interest that's so low that inflation is higher.

The fed can't actually dictate the interest rates but banks follow their recommendation.

Answer 2

How does that affect business?
If interest rates go up it costs businesses more to borrow money.
economy and personal finances?
If interest rates go up it costs it costs more when you buy a house,
however if you buy bonds you get a greater rate of retun.
And, yes, the FOMC led by Ben Bernanke control short term
interest rates which affect all rates.