With a roadmap for higher interest rates, the Fed is starting in small steps

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The Federal Reserve has indicated that it will slowly begin to ease some of its support for this economy by reducing bond purchases – starting next month.

Then maybe if all goes well, it could start pushing up interest rates as well. It is the start of a process that many economists, businesses and investors have watched, expected and anticipated.

“Yesterday I think the Federal Reserve did a really good job, you know, drawing a line between what ‘cone’ meant and what ‘take-off’ would mean,” said Jamie Cox, managing partner of Harris Financial Group. in Richmond, Virginia.

That is, the conditions necessary for the phasing out of support compared to the more stringent conditions for an effective increase in interest rates. So, for now, consumers may only notice slight changes in the housing market, for example, said Daryl Fairweather, chief economist at Redfin.

“The window for which mortgage rates are at record highs is narrowing and could end very soon. In the short term, it might actually encourage more people to buy a home or speed up their home search, ”Fairweather said.

If everything goes according to the Fed’s plan and the economy continues to stabilize, interest rates for things like credit cards and personal loans could start to rise as well.

However, “it’s unclear where the economy or what the economy will look like in the middle of next year, and whether or not the pandemic is contained,” said Jack Kleinhenz, chief economist of the National Retail Federation. . While the Fed has charted the course that could take us to higher interest rates, Kleinhenz said, it starts with small steps.


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