The Fed raises interest rates again

The Fed raises interest rates again

On November 1, 2005, the Federal Reserve Bank [Fed] raised interest rates by a quarter of a percentage point. Since the summer of 2004, outgoing Fed Chairman Alan Greenspan has raised interest rates regularly since hitting a low of just 1%. Now at 4%, Greenspan is expected to raise rates two more times before he leaves office in January 2006. Will higher rates stop inflation? Will the new chairman continue Greenspan’s gradual upward adjustments or let rates level off? Speculation is rife, but there’s one thing you can know for sure: You’ll be paying more for many of life’s expenses.

A rate hike by the Fed means you’re likely to pay more for something, including:

Credit cards. Not known for showing much restraint, you can bet credit card companies will continue to raise interest rates on all but their best customers. Rates of 12, 15, and even 21% or more reappear.

Mortgage rates. Holders of fixed-rate mortgages are fine, but those with variable-rate mortgages will pay more. Much more so if they haven’t experienced previous rate hikes and their mortgages need to be adjusted upwards. More money for mortgage payments means less money for disposable items.

Car loans. If you need a new car and can still find zero percent financing, then take the offer. Auto loans, personal loans, home equity loans, home equity lines of credit, consolidated loans, they will all continue to increase.

Add in high fuel prices, expected increases in medical costs, and Americans will be squeezed. With the holiday season quickly upon us, retailers will need to cut prices to attract customers who are holding a dwindling cash reserve.

For people who don’t have excessive debt, the Fed’s rate hike will have little or no effect on them. For everyone else, the clip is on!

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