Interest Rates 101

Interest Rates 101

It is fairly common knowledge that the Federal Reserve has held interest rates artificially low for quite some time now, holding at 0%.  This clearly indicates, the Fed has only one option when it comes to manipulating interest rates and that is to increase them.  This puts our country in quite a tight spot, in that we haven’t seen a recovery yet.  Should the Fed decide to raise interest rates to battle the inflation that is surely coming, we can see that it will also negatively effect the economy, consumer spending, business profits, and even cause higher unemployment.  There is some uncharted water that will be tested over the course of this year.  Several readers have asked, what does it mean when the Federal Reserve raises interest rates, or how does manipulating interest rates affect the economy? 

WHEN THE FED RAISES INTEREST RATES- EXPECT:

HIGHER

Prime Rate

Mortgage Rate

Car Loan Rate

CD Rate

Money Market Rates

Credit Card Rates

LOWER

Stock Market

Business Profits

Consumer Spending

Home Sales

Borrowing

WHEN THE FED LOWERS INTEREST RATES- EXPECT:

HIGHER

Stock Market

Business Profits

Consumer Spending

Home Sales

Borrowing

LOWER

Prime Rate

Mortgage Rate

Car Loan Rate

CD Rate

Money Market Rates

Credit Card Rates

Comments
  1. Manual Lafoy says:

    Thanks for your write-up. One other thing is always that individual states have their own personal laws in which affect homeowners, which makes it very hard for the Congress to come up with the latest set of guidelines concerning foreclosed on homeowners. The problem is that each state offers own regulations which may have impact in an undesirable manner on the subject of foreclosure procedures.

  2. A very helpfull article – A big thank you I hope you dont mind me blogging about this post on my blog I will also link back to this post Thank you

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