Fed Plans Interest Rate Hike For This Summer

Fed Plans Interest Rate Hike For This Summer

The Fed's plotting rate hikes, but it's not that simple.

It may be the first suggestion in some time that the Federal Reserve has an ACTUAL plan to raise interest rates at some point. 

As we all know, rates have been low for an extended period of time.  So everyone's starting to wonder, when will rates go up?  After all, a lot of people have investments in bank products that are extremely stable but have had miserable returns for about the last five years or so.  And considering the sheer amount of treasury notes that have gone out of late, it's not too far gone to suggest that people might be wanting better yields for continuing to pump cash into the United States government.

And so, the announcement recently went out that the Fed's planning to keep rates low "for an extended period", but if jobs growth starts to occur in good measure by summer, the "extended period" will go right out the door.

Now, under normal circumstances, when interest rates go up the stock market takes a bit of a hit.  But since rates are at emergency low levels, raising them to merely normal may not have that same effect.  Of course, that's conjecture at this stage of the game--it's just as fair to suggest that any hike in levels will result in the standard effect of a hit to the stock market. 

The key thing here is, you may want to get ready for a sudden migration if the jobs picture actually does improve.

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Comments

  • Selwig

    May 04, 2010

    What suggestion? The only thing the Fed has said is that they plan to keep rates low for an extended period of time. This article is all conjecture. Employment has hardly picked up and there is no sign of inflation. If anything, inflation is down.

  • SteveAnderson

    May 04, 2010

    Selwig--like I said, "extended", unless employment rates improve. There's an entire school of thought that says unemployment peaked back in October, and if that's the case, historically, a rate hike follows twelve months later. It's happened before, and it could happen again.

    And of course this article is conjecture. It's PREDICTIVE, based on previous trends.

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