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How Interest Rate Changes, And the Fed's Recent Move, Will Impact Your Finances


FED Building
Federal Reserve

Ever since the Federal Reserve (Fed) began raising interest rates in December, many people have been wondering how this will affect their finances. In this article, we'll take a look at how the Fed's recent move and interest rate changes will impact you, as well as some alternative strategies for saving money. So whether you're looking to save on your mortgage or credit card bill, or want to prepare for future rate hikes, read on!

What is an Interest Rate?

When you borrow money from a bank, the bank charges you an interest rate for the privilege. This is how much the bank will earn on your money (plus any other fees). The higher the interest rate, the more expensive it is to borrow.

The Federal Reserve has been raising interest rates in order to slow down the economy and make it more stable. As of September 2018, the Federal Reserve has raised rates four times in 2018 and six times since December 2015. Higher interest rates make it more expensive for people to borrow money, which can impact a number of areas of your life.

When you borrow money, your monthly payments will increase as well. If you have a high-interest loan, this could mean that you are paying back more than the original amount borrowed over time. Additionally, higher interest rates can lead to ballooning debt loads and increased chances of defaulting on loans. For some people, higher interest rates could also mean they lose their homes or cars because they cannot afford to pay back their loans on time.

What does this all mean for you? To understand how changes in interest rates will affect your finances, it's important to understand how these rates are determined. Interest rates are set by banks

What is Interest Rate manipulation?

Interest rate manipulation is when a financial institution, such as the Federal Reserve, influences the interest rates that banks charge on loans in order to create an artificial demand for or scarcity of dollars. This can be done by increasing or decreasing the supply of dollars available to banks, thereby influencing the price of currency and affecting investment decisions. The Fed has been increasingly accused of engaging in interest rate manipulation since the 2008 recession in order to stimulate the economy. However, this tactic has come under fire recently due to its potential negative effects on the economy, such as asset bubbles.

How the Fed's recent move will impact interest rates

The Federal Reserve has raised interest rates by 0.25 percentage points, from 0.00-0.25%. The increase will make borrowing more expensive for consumers and businesses, which in turn could impact the economy. Here's how the move will affect you:

If you're a consumer, you'll likely have to pay higher interest rates on your loans, car loans, and other types of loans. This could lead to higher monthly payments and increased costs over time.

For businesses, the increase in borrowing costs could lead to reduced investment, fewer job opportunities, and decreased profits.

What to do if you're affected by interest rate changes

The Federal Reserve's recent move to raise interest rates will have a sizeable impact on your finances. Here are a few things to keep in mind if you're affected:

- If you're carrying a balance on your credit card, the interest rate increase will increase your monthly payments. Make sure to review your account information and make necessary changes to avoid overspending.

- If you're invested in stocks or bonds, the interest rate increase could lead to a decrease in your net worth. Be prepared to sell off some of your holdings if necessary in order to maintain a consistent portfolio value.

- If you're financially dependent on a fixed income such as Social Security or pensions, an interest rate increase could mean an increased payment due. It's important to discuss any changes with your financial advisor in order to ensure that you're taking appropriate steps to protect yourself.

What are the Effects of Interest Rate Changes on Your Finances?

While the Federal Reserve has raised interest rates twice this year, these moves are not isolated events. Over the past two decades, the Fed has increased rates seven times and lowered them six times. The effects of these changes on individual finances depend largely on how much money you have in debt and how sensitive your investments are to interest rates.
If you have a lot of money invested in bonds or other fixed-income securities, a higher interest rate will cause your returns to decrease. Conversely, if you have a lot of debt, a low interest rate can lead to larger repayments than originally planned.
Generally speaking, people who borrow money to finance their purchases are more sensitive to changes in interest rates than those who use consumer loans or credit cards. For example, if you're borrowing money for a car purchase, your monthly payments will be different even if your loan is fixed for the life of the car.
But there are some exceptions. If you're using a variable-rate loan like a credit card or personal loan where the interest rate changes with the market, then a higher interest rate may mean that your payments go up faster than they would with a fixed-rate loan.
The bottom line: It's important to keep

How to React when Interest Rates Change

The Federal Reserve has raised interest rates for the third time this year, and according to numerous economists, it's likely there will be more hikes in the near future.

When interest rates increase, it impacts a variety of different financial products and investments - from mortgages to car loans to student loans. Here's a look at how interest rate changes will impact different parts of your life:

Mortgages \u2013 When you take out a mortgage, the interest rate is usually fixed for the duration of the loan. So if the Federal Reserve increases interest rates, that could mean that you'll have to pay more in interest every month. If you're already struggling to make your payments on your current mortgage, this could put you in even more trouble.

Car Loans \u2013 When you finance a car, you might be able to negotiate a lower interest rate if you put down a larger upfront deposit. But if interest rates go up, that could mean that you'll have to pay more each month in car loan payments. And if you're thinking about buying a car soon, now might not be the best time - prices could rise as well.

Student Loans \u2013 Interest


As interest rates continue to rise, it's important that you be aware of how this could impact your finances. If you have a variable-rate mortgage, for example, your monthly payments could go up as the rate increases. And if you're carrying debt or investing in stocks or bonds that are sensitive to interest rates, now may be a good time to reassess your situation and make any necessary adjustments. The best way to prepare for future changes is to stay informed and consult with an experienced financial advisor.