Experts Say Fed May Raise Rates Sooner than Expected
Written by
Stacey Bumpus
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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 SayOn 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.
