Rising Rates; Are you in good shape for the future?

Image of a Dollar Bank Note, The Federal Reserve, rates and you!

The Federal Reserve, which raised its benchmark rate in March for the second time in three months, this time to a range between 0.75 percent and 1 percent, is finally moving toward the end of its nine-year-old economic stimulus campaign, which began in the depths of the financial crisis.

But Janet L. Yellen, the Fed’s chairwoman, said at a news conference after the decision was announced that the Fed did not share the optimism of stock market investors and some business executives that economic growth is gaining speed. It still plans to move slowly because the economy continues to grow slowly. She suggested that the Fed would have plenty of time to adjust its plans should President Trump and Congress cut taxes or spend massively on infrastructure.

Her announcement was full of confidence. But it certainly was not jovial. “The data has not notably strengthened,” Ms. Yellen told reporters. “We haven’t changed the outlook. We think we’re moving on the same course we’ve been on.”

The Fed said that the United States economy continued to chug along, expanding at a “moderate pace.” Employers are hiring, consumers are spending and businesses — the laggards in recent months — are starting to plow a little more money into their operations, too.

The Fed’s sobriety did not appear to make much of an impression on investors. The stock market’s heady march that began after Mr. Trump’s election continued briskly. The Standard & Poor’s 500-stock index rose, moving up sharply after the announcement. Some said the Fed was still a long way from doing anything that might hurt.

“The first four to eight rate hikes are the low-hanging fruit,” said Deron McCoy, the chief investment officer at SEIA, a Los Angeles firm. “The real test will be whether the economy can withstand positive real rates. And that still seems to be a 2019 topic.”

Some analysts said the Fed will want to see an impact from its actions. “Policy makers hike rates to tighten financial conditions,” said Ellen Zentner, the chief United States economist at Morgan Stanley. “If this easing of financial conditions on the back of today’s hike are sustained, that would tell policy makers they need to do more.”

Ms. Zentner said she expected the Fed to raise rates again at its June meeting. The Fed’s policy-making committee next meets on May 2 and 3.

Rate Graph

Source: Federal Reserve | Note: Rate is the federal funds rate until Sept. 27, 1982, the federal funds target rate until Dec. 15, 2008, and thereafter it is the upper limit of the federal funds target rate range.

Credit Union of Denver, along with other financial institutions, will be watching The Fed’s actions and analyzing the landscape to adequately manage the portfolio of our members’ assets. That being said, you should look for rates to rise for loans and for investments. This is good news for those needing better investment rates, but could be a call to action for those looking for a loan in the near future.

Rates have been at an all-time low for so many years, some have forgotten what “real” rates look like in a “normal” economy. Keep an eye out for our rates to be updated monthly on our website. If you would like to have one of our loan officers review your credit bureau or financial picture, in order to restructure debt and assets, we offer a free consultation and free credit bureau review. Give us a call at 303.202.5659 or 800.280.0234 for a personal appointment. Your financial success is our goal too.

Originally written by the New York Times, added commentary by C•U•D.