Economy

While the news isn't official yet, a recent report from the Wall Street Journal discusses the possibility that the Federal Reserve will raise interest rates sooner than even it expects. This comes prior to a report due out this week that is set to gauge the economic recovery's strength. If the report brings good news, the Fed may feel obligated to push rates up, WSJ reports.

Upcoming Report and What It's Expected to Say On Tuesday, the government is expected to release its final report of the year. The report will focus on third-quarter domestic product is predicted to show that the economy has grown at an annualized rate of nearly 3 percent.

But that's not all. Experts are predicting that fourth quarter will show even more growth. However, if this is the case, the Federal Reserve, which has said it will hold rates (mortgage, bank and auto loans, etc.) low to help the economy grow, may feel forced to go ahead and raise its rates.

What Happens if Rates are Raised

If the rates are raised, this usually is not to the benefit of consumers. Taking out a mortgage, bank or auto loan could mean having to pay more due to higher interest. Most people aren't excited about the paying more simply because interest rates are higher, which is why many take out variable-rate loans - to anticipate lowered rates. However, with rates expected to rise only, a variable-rate loan could result in paying more down the line.

The WSJ report explained that reports alone won't determine whether rates are raised. Consumers will also determine when the Fed will make its move. If holiday spending is strong, this may also indicate a strong enough economy to go ahead and raise rates.

So if you were hoping to take advantage of these low rates, you may want seal the deal on a fixed-rate loan before rates rise again, something economists are now saying could happen as soon as June.

On Wednesday, the Federal Reserve pledged to hold interest rates at a record low. It's hope was that with doing this, it would drive down double-digit unemployment and possibly sustain the recovery of the economy, which it says is growing.

The Fed Isn't Raising Rates Anytime Soon

Fed. Chairman Bernanke and his colleagues have given no signal that raising rates is anywhere on the agenda in the near future. While they noted that layoffs have slowed, there are still a few issues that need to be straightened out before they feel rates need to be adjusted, including:

• Consumer spending: According to the Fed, consumer spending is still sluggish at best.
• Job market: The Fed notes that the job market is still weak and unemployment is still high. Also, companies are still a bit wary of hiring.
• Wages: There has only been slight growth to wages - not enough to help consumers boost the economy.
• Credit: Though banks have been given ample bailout money, many still want to protect themselves by keeping their credit distributions tight.

The Rates You Can Expect

Here is a list of rates that you might expect from the Federal Reserve in the near future:

• Bank lending rate: Zero to 0.25 percent (this is where it's stood since last December)
• Credit cards and other consumer loans: 3.25 percent, which is its lowest point in decades
• 30-year mortgage loans: last week, the rate was 4.81 percent, which is down from 5.47 percent last year

According to the Fed, by maintaining super-low interest rates, borrowers will be willing to take on more debt. However, those who were looking for good returns on their savings, money market and CD accounts may feel the brunt of the low rates since they won't see the returns they've hoped for.

If you're looking for rates to change, don't expect it anytime soon. Some economists predict the rates will stay the same well into 2010 and possibly into 2011. If you're concerned about ways to make returns, you might consider learning to invest in the shadow of a recession.

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