There are very few things in our country that have as significant impact on our financial status as interest rates. How high or low interest rates are could have an extraordinary impact on what we are able to afford and how efficiently we can plan for our retirement. In the following paragraphs I will go into detail about interest rates and how the future decisions of the Federal Reserve (FED) could impact us as an economy.
For the last few years, interest rates in our economy have been incredibly low. This could be good and could be bad, depending on an individual’s goals. If you wanted to take a loan out or get a mortgage for a house, the interest rate for paying back that loan or mortgage could be significantly less than it would have been 10 years ago. Contrarily, if you have a bank CD or if you were invested in products offered by the U.S. Treasury, the amount of interest you would receive could be very low.
Last week the Chairwoman of the FED, Janet Yellen, had a meeting with the House of Financial Services Committee to discuss an interest rate hike that may or may not take place in December. If the FED decides to actually raise rates, it will probably be a very small rate increase. However, if they do decide to do so, it could have a negative effect on the investing public. This could happen for a couple of reasons: a rise in interest rates could create a fragile investing environment, could force people to be less generous with their investment monies, and could lower interest rates on products geared towards providing income (i.e. bonds, Treasury products, preferred stock, etc.).
Interest rates are a very crucial part of our economy. Whether we need them low for the purpose of generating higher returns for our investments, or for the purpose of low interest rate payments for mortgages or loans, FED interest rate hike could have a significant impact on the investing public and possibly the economy. One thing is for certain; interest rates are and will continue to be a very important part of our monetary system.