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Federal Reserve Bank on November 1, 2005 [Fed] Raised interest rates by a quarter percentage point. Since the summer of 2004, outgoing Fed Chairman Alan Greenspan has been raising interest rates on a regular basis, reaching as low as 1% since then. Now at 4%, Greenspan is expected to raise rates twice before leaving office in January 2006. Will Higher Rates Stop Inflation? Will the new chairman continue Greenspan’s incremental adjustments upwards or will he allow rates to drop? 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’ll pay more for some including:
Credit Card. Not known for showing much restraint, you can bet credit card companies will continue to raise interest rates except for their best customers. Rates of 12, 15, and even 21% or more are reappearing.
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 felt previous rate increases and their mortgages are due for an upward adjustment. More money to pay the mortgage means less money for disposable items.
car loan. If you need a new car and are still looking for zero per cent financing, avail the offer. Car loans, personal loans, home equity loans, home equity lines of credit, loan consolidation, all will continue to grow.
Add in higher fuel prices, anticipated increases in medical costs, and Americans are getting squeezed. With the holiday season fast upon us, retailers must slash prices to attract customers who have dwindling cash reserves.
For those who don’t have excessive debt, a Fed rate hike will have little or no impact on them. For everyone else, the pinch is on!
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