Fed Hints at September Rate Hike

For the second straight day, markets were on a path to recovery. All three of the major indices rose, mostly in self-defense. There were deals to be had everywhere after this latest round of selloffs, and investors were capitalizing on them.

The Dow rose by 121.12 points in trading today, and closed at 17,751.39 -- still well below the 18k support point that we'd all love to see it at. The S&P 500 led the day in real gains, jumping up 0.73% to 2,108.57. The NASDAQ followed suit, adding 22.52 points to close out the trading day at 5,111.73.

Fed Hints at September Rate Hike

Although the Fed's never been crystal clear about anything, analysts think that the latest statement from Janet Yellen could be hinting at a September rate hike.
The Federal Reserve just wrapped up their monthly meeting, and the report that they gave has analysts on The Street looking hard at September for the rate hike that some are dubbing “the liftoff.”

And it would be a liftoff, whenever it happens. The prime interest rate has been stuck at 0% since the financial crash in 2008. That makes it effectively free for banks to borrow money from The Fed. When this rate hike comes, it will be a sign that the economy is back on firm footing. It will also be a sign that the financial sector has recovered, and has enough life left in it to start paying for the privilege of borrowing again.

According to the Fed, there are multiple factors that they're considering. Some of the largest are unemployment numbers, which have been sluggishly falling for months. They're also worried about the situation overseas, which for the moment has cleared up as Greece got another bailout and voted for austerity measures. The latest report is cautiously optimistic that the time is coming for big banks to start paying for borrowing again.

What will it all mean for average Americans? For one thing, mortgage interest rates will rise in order to help cover costs. One of the things that banks borrow the most money to cover is mortgages. In fact, almost all loan interest rates should be on the upswing when the Fed finally raises rates. It also means your savings account might pay a little less interest. In another cost-cutting measure, banks will offer slightly less yield on savings in order to cover the cash that they have to lay out to the Fed.
Published on Jul 29, 2015
By Aaron Phillips
Aaron Phillips is a financial researcher and journalist based out of Michigan. He regularly writes the IG Daily and IG Weekly columns.

Copyrighted 2020. Content published with author's permission.

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