The Federal Reserve has positive feelings about the economy in 2018, and news has now emerged that they plan to make three more rate increases before the end of the year.
There were a number of factors leading to confidence from the Fed. The most obvious one is that the economy is in good shape. Growth has been slow for most of the past decade, but there has been a surge in the past three months. Unemployment is dropping, and consumer confidence and spending is increasing. Businesses are also investing on a scale that we haven’t seen in the past seven years.
The tax cuts introduced by the Government and President Trump have also helped to stimulate the economy, and the Fed has revaluated their outlook and said that the economic benefits of tax cuts “might be somewhat larger in the near term than previously thought.”
A strong economy and continued growth means that the Fed will increase interest rates and start to sell assets that were acquired during the last economic downturn. Increased rates could mean that borrowing will slow down, and loans and mortgages will become more expensive.
Federal Reserve Rate Increases Show Significant Confidence
The Federal Reserve is always cautious when releasing the minutes from their internal meetings. The central bank is usually cautious with their words and outlook, but the extent of their confidence can be seen in the fact that they are willing to make rate increases for at least the next two years.
By raising interest rates the Federal Reserve is essentially saying that the economy doesn’t need low interest borrowing to spur growth. It suggests that the economic climate is healthy enough that interest rate increases won’t be detrimental to the majority of businesses and private borrowers.
Yes, loans and mortgages will cost more, and financed purchases will also cost more, but purchasing could still remain high if more people are employed and if tax cuts ensure that they have more money in their pockets.
Rising interest rates also mean that government borrowing will be more expensive, which could slow down public investment. It is yet to be seen what kind of impact this would have on local and national-scale government projects.
Now Could Be a Good Time to Refinance
With rate increases pending; refinancing a loan or home mortgage could be a good idea. To lock in interest rates for a period will mean saving money on the term of the loan. Individuals and families who are planning to borrow in the near future should consider their options for borrowing today, to take advantage of low interest rates for as long as they last.
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