Coming This December: Federal Rate Hikes… (More in 2018)

There’s been chatter recently among economic experts that federal rate hikes would likely soon be on the way. Since 2016, the Federal Reserve has risen interest rates three times, but they’ve not not made any definitive announcements on the further hikes, leaving it open to speculation when they’d actually be introduced. It appears that economists and experts have now been able to reach a consensus. In fact, it appears that the recent Senate tax reform bill passed on Friday may have forced the Fed’s hand. In a recent article, Reuters reports that the recent legislation has forced a shift in risk-forecasting; toward a need for higher federal rate hikes and sooner. According to the article, experts are projecting three rate hikes between now and 2019. This is actually in accordance with the Fed’s own projections, however the reasoning is up for debate.

Moderating Economy or Downturn Preparation?

While economists and financial experts seem to be in basic agreement about the projected number of rate hikes we should be expecting, there appears to be two schools of thought as to the Fed’s reasoning for hiking interest rates. A recent Reuters poll surveyed 103 economic experts. When asked what factors contributed to federal rate hikes, 40 percent said they believed it was to cap future inflation, while nearly a third believed the Fed is padding for a market downturn.

What Federal Rate Hikes Mean for You

Most experts agree on projections that the Fed will bump the current rate by 25 basis points, raising the current percentage from 1.25 to 1.50 percent. At the current pace, federal interest rate hikes wouldn’t hamper economic growth. There’s still room to grow and we’re still a comfortable distance from pre-recession levels. If you’re wondering how the expected rate hikes are going to be affecting your day-to-day, you probably won’t see too much change. As with any interest rate hike, savers benefit from increased higher interest rate returns,while spenders will find themselves paying higher rates on credit cards and loans.