Economists thought inflation would pick up. Guess again. The Consumer Price Index has advanced less than 2% in a year. Mortgage rates are still not far from historic lows. Low inflation is still with us even in this economic recovery, and it may make the Federal Reserve reconsider its near-term timeline for normalizing monetary policy.1 Interest rates on certificates of deposit? They are rising, but hardly as fast as savers would like. Right now, CD investors are paying an opportunity cost. Look at the recent performance of the S&P 500. Across the six months ending in June, the equity benchmark
The Federal Reserve takes the key interest rate north by another quarter point. On Wednesday morning, futures markets put the odds at 99.6% of a June interest rate increase by the Federal Reserve. Sure enough, the central bank made a move. It raised the key interest rate by 0.25%, taking the target range for the federal funds rate to the 1.00-1.25% range. The Federal Open Market Committee voted 8-1 to hike the rate, with Minneapolis Fed President Neel Kashkari being the lone dissenter.1,2 What were the key takeaways from the latest Fed policy statement? A few are worth noting.
As the central bank starts tightening, some positives & negatives may emerge. Economists widely expect the Federal Reserve to raise interest rates this month. Additional incremental rate hikes may follow in 2016. If you are retired (or soon will be), you will want to consider what gradually higher interest rates could mean for you financially. Some of the effects are already being felt. Glancing at Freddie Mac’s weekly surveys, average interest rates for fixed-rate home loans climbed about 0.2% between October 8 and December 10 on assumptions of the federal funds rate rising. (Bond market behavior influences these rates as