The Fed Rate Just Increased for the First Time in a Year. Here’s What That Means for You


Janet Yellen

Janet Yellen and the Federal Reserve finally and went and did it. The Federal Fund Rate (or “Fed rate”)  was just increased by .25%, bringing the rate between .5% and .75%. Additionally, the Fed will likely increase their rates throughout 2017 by a quarter of a percent at a time.

(If you don’t know what the Fed rate is, read this and then come back.)

According to Yellen, the decision was made to increase the Fed rate after unemployment hit 4.6%, a low that hasn’t been seen since the 2007-2008 recession. During a press conference, Yellen stated that raising the Fed rate meant the Federal Reserve had confidence in the economy’s progress, as wages are slightly increased and consumer sentiment in the economy is more positive than before.

If this all sounds confusing, fret not. Here’s what increasing the Fed rate means for you, and why Janet Yellen and company raised it in the first place:

The federal fund rate was lowered during the recession to artificially stimulate the economy.

Janet Yellen
Janet Yellen, Chair of the Federal Reserve (Flickr/Day Donaldson)

As you can see, we’re no longer in a recession. Unemployment is down, wages are slightly up , consumer spending is up, and people aren’t as mad at the economy as they were before. Also, more than 15 million jobs were created since the Great Recession, so that’s something.

The Federal Reserve no longer needs to artificially stimulate the economy, so they increased the Fed rate.

The Fed rate determines the cost for big banks to borrow from other big banks. Also, increasing interest rates effects how savings and money market accounts earn interest, thus providing more of an incentive for people to put money into savings accounts. It will also strengthen the dollar, among many other effects.

The Fed wants to increase their rate to 2.9% by the end of 2019.

This would be done to temper the artificial stimulation of the past several years. While Janet Yellen and her peers realize that there will soon be a major policy change, they still have faith in the American economy and its growth. They also believe they can move closer to their goal of 2% inflation.

On the other hand, the stock market’s reaction this afternoon suggests investors are not happy about the announcement.

DIA stock as of 12/14
$DIA, a popular Dow Jones ETF (StockTwits)

When the Fed rate goes up, the incentive for investing in the stock market goes down. Since you can make more interest at banks now without risking your money on the stock market, people are a tad less likely to invest in riskier stocks and funds. This makes investors less enthused about the market’s future, which is why stock indexes like the Dow Jones Industrial Average and the S&P 500 are down today.


The Fed rate may be up and people might soon enjoy higher interest rates at banks, but that doesn’t mean investors will up and leave the stock market. Sure, the market is down today, but it will (hopefully) normalize as investors realize increasing the Fed rate is a necessary step into a healthy economy.


111 Comments

  1. Pingback: albuterol po
  2. Pingback: priligy price
  3. Pingback: ivermectin 12
  4. Pingback: ivermectin 6mg
  5. Pingback: ivermectin tablet
  6. Pingback: viagra pills 50 mg
  7. Pingback: plaquenil for sale
  8. Pingback: buy viagra otc
  9. Pingback: order ivermectin
  10. Pingback: Anonymous
  11. Pingback: Anonymous
  12. Pingback: Anonymous
  13. Pingback: stromectol price
  14. Pingback: flccc ivermectin
  15. Pingback: cost of ivermectin
  16. Pingback: ivermectin pills
  17. Pingback: viagra prices
  18. Pingback: cialis vs viagra
  19. Pingback: tadalafil powder
  20. Pingback: sildenafilo
  21. Pingback: cialis tabletas
  22. Pingback: monulpiravir
  23. Pingback: tadal
  24. Pingback: cialis goodrx
  25. Pingback: buy viagra online
  26. Pingback: tadalafil cialis
  27. Pingback: cialis goodrx
  28. Pingback: ivermectin wormer
  29. Pingback: lasix tablets
  30. Pingback: furosemide drug
  31. Pingback: stromectol otc
  32. Pingback: order ivermectin
  33. Pingback: ivermectin 1
  34. Pingback: ivermectin ontario
  35. Pingback: cost of stromectol
  36. Pingback: ivermectin 4000
  37. Pingback: ivermectin 200mg
  38. Pingback: 3algiers
  39. Pingback: stromectol msd

Comments are closed.