Fed Interest Rate Hike Good / Bad News

[jeffrey]

As was widely expected, the Federal Reserve bumped up their rates 0.25% for the 13th time in a row. The Federal Reserve rate now stands at to 4.25%, the highest level since March 2001. While the Fed hinted they may need to raise rates again, they also signaled an end may be near to raising them. What does all this mean to average Joe?

Banks use the Federal Reserve rate to determine their overnight lending rates, which in turn affect how much consumers and businesses pay for various types of loans.




If you have your savings in an online bank account, the rate hike is good news as it will likely mean a continued climb in the rates that online banks are offering.

For those with credit card debt or variable rate mortgages, the rate hike is not good news as the rates on these loans will likely tick upward for. For those who will be shopping for a car or house loan, borrowing money will also be higher with the increased rate.

Stock markets reacted favorably to the news. While rate hikes usually aren't good for the stock market, the wording that hinted that the rate hikes may soon end was seen as positive.