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Investors not worried by Fed’s likely rate hike

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The Fed is expected to raise interest rates for the first time in nine years and investors are largely unfazed by the move. Fed policy makers will meet on Wednesday and are expected to raise interest rates .25 percent from its current rate of nearly zero.

It’s seen as largely a symbolic move that is unlikely make much of a difference on the rate that consumers pay for loans or receive on savings, checking accounts or CDs.

Fed Chairwoman Janet L. Yellen has said that the Fed will move slowly so the rate will remain low for a while. Low rates encourage consumers and businesses to spend rather than save, which boosts economic growth.

Fed actions also get diluted as they flow through the financial system. Savers, who have been hardest-hit by the near-zero interest rate, shouldn’t anticipate a bump in their balances any time soon. Banks, squeezed by low rates and holding record-high deposits, aren’t eager to start paying out more to their customers.

Bank deposits have grown to average about 6 percent annually since 2009. U.S. banks now hold $10.6 billion in deposits, according to the Federal Deposit Insurance Corp.

Interest rates on checking, savings and money market accounts didn’t rise for three to four months after an initial 2004 rate increase, and then only by 0.01 to 0.02 percentage point.

Investors also shouldn’t expect any shockwaves in markets. In a new Gallup poll, 54 percent of U.S. investors say an increase in interest rates would not make much difference to their financial situation. About 30 percent of investors say that the rate hike will be bad for them while 16 percent think a rate hike will be a good thing.

The post Investors not worried by Fed’s likely rate hike appeared first on Central Valley Business Journal.


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