The US Federal Reserve
decided not to change the short-term interest rates on Thursday, Sept 17th
2015. The U.S interest rate is a global economic concern and as of September 17th
the target range for the fed funds rate is 0 to 0.25 percent. This is due to
concern that the recent global economic and financial developments may
restrain economic activity and possibility of further downward pressure
on inflation in the near future.
Even if interest rates
are increased, it still wouldn’t be anywhere close to the pre-crash (2008) interest
rates
Who will lose and who
will gain?
The losers are:
- Savers - The increase is not an automatic qualification for high yield.
- Homeowners who failed to re-finance - rate increase means that home owners who failed to re-finance during the historic low-rate period will have a higher rate if they choose to re-finance after the increase.
The Winners are:
- Homeowners who re-financed - The homeowners that refinanced during the historic low interest rate are among those winning.
- Homesellers - anticipation in interest rates increase means a lot of home buyers will be clearing up the inventories which in turn benefits homesellers.
- Companies doing business in the US – local products will become more attractive where as multinational companies with lots of debt will be hurt because their products will become more expensive in the global market due to rising dollar.
- Firms and people with a high percentage of floating rate debt
Who is stuck in the
middle?
- Homebuyers - buyers could be losing because it will turn to a seller's market during the speculation period of interest rate increase. On the other hand, buyers with good credit will also be winning because the interest rate will not be as high as it was before the market crash.
Sources: CNBC, WSJ, USATODAY
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