Interest rates rising: What’s the impact?
Today, the Federal Reserve increased interest rates 25 basis points, now between 1.00 and 1.25 percent, which was largely anticipated by the market. The biggest impact this increase will have is on credit cards and shorter term debt. From past Fed rate increases, raising rates appears to have had little or no impact on longer term interest.
This increase is positive news, as rising interest rates is another small step toward the Fed’s attempt to return to historically normal interest rates. This rate increase is a reaffirmation by the Fed that the economy continues to normalize and strengthen. It shows that the U.S. has a very healthy economy, good job outlook and growth opportunities.
Looking forward, based on current economic conditions, we are anticipating one more rate increase before year end. In addition, we believe that the Fed will start to decrease its balance sheet sometime later this year or early in 2018, which will likely have a bigger impact on longer term rates.