Fed Rate Hike Looms: What It Means for Savers and Borrowers

The Federal Reserve is expected to raise interest rates for the first time in over three years. Markets are predicting a 0.25 percentage-point rate increase, with a 90% chance of this happening according to the CME FedWatch Tool.

This decision will have far-reaching consequences beyond Wall Street and stock prices. The federal funds rate affects savings rates, credit-card interest, personal loans, and mortgage rates.

For savers, a higher Fed rate can eventually lead to slightly better interest rates on deposits. However, the increase is usually gradual, and basic bank accounts may still offer very low returns.

Credit card interest rates are tied to the federal funds rate, so a rate hike can increase borrowing costs for consumers who carry balances as their variable rates adjust accordingly.