Fed Raises Interest Rates.....

Discussion in 'Budget & Taxes' started by MMC, Dec 16, 2015.

  1. MMC

    MMC Well-Known Member

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    Its here.....what say ye?



    What the Federal Reserve interest rate increase means for you.....

    The long-awaited interest rate hike by the Federal Reserve was finally announced today. The Fed announced that it would raise rates by a quarter of a percentage point, up from close to zero. While the increase was small, the move was significant.

    So how will the interest rate hike today affect you?

    Mortgages. Rates are going to go up. Most economists recently polled expect the conventional 30-year mortgage rate to rise in 2016. If you are already locked into a 30-year fixed mortgage, you have nothing to worry about. Most adjustable mortgage rates, however, are reset once per year. So if rates rise a number of times before your next reset, you could end up paying more. An alternative would be to consider refinancing to a fixed rate loan before long-term rates increase significantly.

    Credit cards. Similar to adjustable rate mortgages, credit card rates are likely to rise almost immediately. That, in turn, will mean a higher annual percentage rate (APR) for many variable-rate credit card borrowers—the predominant type of credit card agreement. And unlike other credit card rate increases, a 45-day notice from the credit card issuer isn't required.

    Auto loans. As rates increase, the cost of borrowing to buy a new car rises. The result of a rate increase is that you may decide to put that purchase off for now. The rate increase today was small, but if future increases are on their way, car loans stand to become much more expensive. But there is some good news. If fewer people are buying cars, inventory levels could climb, which, in turn, could lead to the price of new cars falling......snip~

    https://finance.yahoo.com/news/federal-interest-rate-increase-means-192542279.html
     
  2. MMC

    MMC Well-Known Member

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    The Fed’s Uncertain Leap Forward
    Using forward guidance instead of a monetary rule once again leaves financial markets unsettled
    .

    As expected, the Federal Reserve on Wednesday announced that it would raise the target range for the federal-funds rate to between 0.25% and 0.5%. The decision raises more questions than it settles. Most involve uncertainty about future interest-rate changes, and some about technical or operational issues.

    The Federal Open Market Committee’s rationale for its decision offers clues about what may come next. Future decisions, the FOMC said, will be dependent on “a wide range of information.” That by itself is not informative, but a reading of the entire news release suggests that continued improvements in labor-market conditions will be critical to future rate decisions. The first paragraph discusses the improvement in labor-market conditions. These conditions are also the first item mentioned in the list of information to be considered for monetary-policy decisions.

    The Fed’s dual mandate requires the FOMC “to foster maximum employment and price stability.” The Fed is counting on the actual inflation rate to move up to its target rate of 2%. Thus far, inflation has stubbornly remained below that target. Fed officials are anticipating that tightening labor-market conditions will produce upward pressure on wage rates and then prices.

    That analysis derives from the Fed’s continued belief in the Phillips curve, the theory that there is an inverse relationship between the unemployment rate and the inflation rate. Like many economists, I think the reasoning behind the Phillips curve theory is flawed and has been discredited by the work of numerous researchers, of which Milton Friedman is the most notable. But it is fundamentally the Fed’s model. Accordingly, improvements in indicators of labor-market conditions are important predictors of future Fed behavior.....snip~

    http://www.wsj.com/articles/the-feds-uncertain-leap-forward-1450310962

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