When will the Fed begin to raise interest rates?
Six and a half years ago the Federal Reserve put its benchmark interest rate close to zero, as a way to bolster the economy. But that policy is expected to change.
It’s a “liftoff” – to use the Fed’s own term – that’s getting the kind of attention that space aficionados once lavished on NASA rockets. Fed officials left rates unchanged after meeting in September, but when they do make their announcement, it will have lasting consequences.
The last time the Fed raised interest rates, in June 2006, Facebook was mainly for college students and had one-tenth the users of Myspace.
The Federal Reserve’s decision to raise the federal funds rate will be akin to a doctor’s decision that a patient is well enough to be gradually taken off medication. The thinking inside the central bank is that the economy is finally healthy enough that borrowing costs should return to more “normal” levels to help keep future inflation from accelerating too much.
But it is a moment with challenges. It could send markets into a tizzy (if past experience is any guide), lead to a slower economic recovery and make it harder for workers to press for higher wages. For savers, it could signal higher returns, but those borrowing to buy a house or a car may soon have to pay more.
How could these changes affect you? Contact Empire to find out...