Fed Decision Day – Will The Consumers Get Any Reprieve On Interest Rates?

The one burning question that is troubling many CD savers these days is whether the Fed will increase the rate in the market? Many savers have been waiting on tenterhooks and hoping that the promised rise in the interest rates will ultimately result in a good yield for them. But the announcement this Thursday just dashed some hopes while others still believe that hope is all they have left.

It was expected that the Fed will announce shortly if they will be increasing the rates or not. The latest reports highlight that there will be no changes in the rates for now, and the market is expected to proceed with investment activities like before.

But while many hopes have been dashed, there is speculation in the market that the rates will eventually increase. One major question which is now troubling the consumer is regarding why the rise of interest rates matters at all, and what would be the impact of a rate hike for a family.

Louis Navellar who works as the chairman money management within the firm of Navellar & Associates, said that a hike in the interest rate will help widen the wealth gap. The lower income families have to dedicate more of their income to make interest payments and pay off auto loans.

Yet due to the immense political pressure, it is unlikely that the policy makers will allow a significant hike in rates or borrowing costs within the upcoming months. This is because issues of income inequality and stagnant wages will present themselves as hurdles in this path.

It is also very important to note that while the low interest payments are an advantage, one shouldn’t expect any major changes in the borrowing habits all of a sudden. While many savers would expect a rate hike to have a direct positive impact on their yield returns, it is important to understand that it will take the rates some time to reach a level when the yield would once again be 3 or 4% on Certificates of Deposit.

Greg McBride, who is the chief financial analyst at the finance portal named Bankrate, said that many of the banks have a lot of deposits, which means that they don’t necessarily have to deal with consumers with higher rates.

Bride said that even if the Fed decides to allow a hike in the interest rate it doesn’t mean that the terms will affect the CD savers automatically, which means that even if the ideal were to happen, it will take some time for the impact to trickle down to the investors.