The Federal Reserve doesn’t just raise interest rates on a whim.
While a steady economy and improving unemployment rates have many convinced a rate hike is in order for the United States, there is plenty of reason for the Fed to play it safe before issuing an increase.
Some say low interest rates have helped stimulate recent economic growth by making money cheap to borrow. Companies invest more in their operations, and consumers buy more houses, cars and other large-ticket items.
However, others argue, the more people buy, the more manufacturers believe they can charge, and this can lead to inflation. The Fed tries to pre-empt this from happening by raising interest rates to slow inflation and keep supply and demand in check.
There are positives and negatives to an interest rate increase, and how it affects you depends on your financial situation.
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