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Interest rates are rising.
The Federal Reserve has hiked the benchmark interest rate twice this year, and it expects to make two more hikes before 2019 arrives. It projects the federal funds rate will approach 3.5% by 2020. (1)
Are you retired, or about to retire?
You will be happy to know rates of return are improving on fixed-income investments. Take 1-year certificates of deposit, for example. Back in 2015, most of them were yielding 0.25%. Now their return is around 2.3%. Money market funds and even deposit accounts should soon feature slightly higher interest rates. The downside of this? If fixed-income investments grow increasingly attractive, investors may pull money out of equities. (4)
Do you have a lot of credit card debt?
The APR on your credit cards should continue to rise in response to the Fed’s moves. (2)
Do you have a fixed-rate mortgage?
You are unaffected. If you have an adjustable-rate mortgage, your payments may reset higher at the start of the next adjustment period. (3)
Are you a business owner seeking a short-term loan?
Try to arrange financing now. The cost of short-term borrowing increases when the Fed hikes. (2)
Do you own a business that sells high-end merchandise?
Your sales may be impacted. Higher interest rates force consumers to put more money toward debt. That means less disposable income to spend on the good life.
Sources
- bondbuyer.com/articles/fed-raises-rates-officials-boost-outlook-to-four-hikes-in-2018
- smallbusiness.chron.com/interest-rates-affect-businesses-67152.html
- tinyurl.com/y74tqh6q
- marketwatch.com/story/rising-interest-rates-give-retirees-good-news-and-bad-news-2018-06-20
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