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Honored Contributor
Posts: 18,612
Registered: ‎10-25-2010

Re: 💵 Will Fed Interest Rate Hike Mean More Interest In Your Savings Account?

Back in 1979, my DH and I took out our first mortgage.  We searched and searched  and found the lowest one out there at 11.75%.  We made good interest on our savings too.

 

It is no secret that when the interest rates are high. they are high for the saver and the lenders.

 

Right now, the interest rates are low for the saver and the lenders.

 

No bank is going to give you a high interest on your savings and collect low interest on borrowed money.

 

.25% is really a low amount, not enough to cause our interest savings rate to go up.

 

Respected Contributor
Posts: 4,681
Registered: ‎03-09-2010

Re: 💵 Will Fed Interest Rate Hike Mean More Interest In Your Savings Account?

the Fed controls the base interest rate. what gets passed on by  mortgage companies or credit card companies in their rates is their call.  usually competition among them keeps things pretty much in line. you choose what banks or mortgage companies you deal with.

that said 1/4% is not a major move and has been widely anticipated for several months so may not move much of anything.  if the economy continues to pick up steam, banks will want to attract more deposits for increased loan volume.  that is what will push savings rates up because the banks will use a higher than market rate to attract more deposits (to loan out) -  so hope for stronger growth!!!

Honored Contributor
Posts: 13,775
Registered: ‎07-09-2011

Re: 💵 Will Fed Interest Rate Hike Mean More Interest In Your Savings Account?

 

 

I have no expectations that this change will have any positive repercussions for me.

"Animals are not my whole world, but they have made my world whole" ~ Roger Caras
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Re: 💵 Will Fed Interest Rate Hike Mean More Interest In Your Savings Account?

Respected Contributor
Posts: 4,681
Registered: ‎03-09-2010

Re: 💵 Will Fed Interest Rate Hike Mean More Interest In Your Savings Account?

this is the THIRD incremental rate hike this year - as pretty much predicted by Janet Yellen as the plan months ago. 

 

http://money.cnn.com/2017/12/13/news/economy/federal-reserve-december-rate-hike/index.html

 

rates have been abnormally low for some years, hoping to spur growth which was still disappointingly low.  with upcoming changes in fiscal policy (taxation for example) on the table, growth has picked up in anticipation and the equity markets have responded positively. 

 

interest rates are important for loans - but also for consumer savings.  higher rates spur more saving.  also the Fed uses tight money (higher rates) to control inflation (slow down growth that is too fast). 

 

right now the Fed has some way to go to get to normal relationship between the base rate and the rate of inflation. rates should be about 1% higher to be in the normal range.  but the Fed has moved gradually so as not to upset growth.  it may be able to move more quickly going forward because growth has doubled the past 2 quarters. 

 

it is in the economy's best interest for interest rates to stay ahead of inflation (unless you want a period like the late 1970's when we had hyperinflation). 

 

by the way the Fed  is separate and independent from the administration and Congress.

Respected Contributor
Posts: 4,681
Registered: ‎03-09-2010

Re: 💵 Will Fed Interest Rate Hike Mean More Interest In Your Savings Account?

[ Edited ]

@Carmie   the inflation rate in the US in 1979  was over 13%!!!!!.  and went higher because the Fed did not stay ahead of it.  our rate right now is about 2%.  it took years to bring inflation down in the early 1980's.  we don't want that situation again.  your money was worth less because inflation ate away at it.

Honored Contributor
Posts: 18,612
Registered: ‎10-25-2010

Re: 💵 Will Fed Interest Rate Hike Mean More Interest In Your Savings Account?

@ms traditional.  I agree with both of your postings.  I said some of the same things in an earlier post, but it was deleted by the mods as being political. (???)