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The Rate Hike’s Impact on the Financial Sector

by AOG Wealth Management

The Federal Reserve’s interest rate increase is the first increase in almost ten years. While some worry that an increase only brings negative results, economists agree that a higher Fed interest rate can bring some good with it.

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Here are four areas to watch for the impact of higher interest rates.

Retirees
For retirees, higher interest rates can mean a better return on their bank account savings and other financial instruments. Lynn Reaser, chief economist at Point Loma Nazarene University said that higher interest rates on financial instruments would aid older Americans who try to live on their retirement savings. As the population ages over time, more retirees will come to appreciate even the modest interest hikes that come with retirement.

Lenders
When interest rates increase, banks and other financial institutions can charge more for the use of their money. The Director of The Institute for Economic Competitiveness, Sean Snaith, said that banks have better incentives to loan funds at higher interest rates. This type of cause and effect could be the grease to get more money loaned to businesses to further stoke the economy.

Savers
If you are a saver, then we have good news for you: there will be a modest improvement in your interest rates. According to Bankrate’s weekly survey, an “Average 1- and 5-year certificates of deposit have paid less than 1% interest since September 2012.” Experts also say that Fed rate hikes will bring about higher returns paid on savings.

Travelers
For people who love to travel, a stronger US dollar will provide more buying power for Americans heading overseas. According to Bankrate, Fed tightening results in a higher dollar. The US dollar is getting stronger, especially against the Euro.

A Fed rate hike is not as daunting as some may think. If you need help in maximizing your financial assets, let AOG wealth advisors in Great Falls guide you to achieving your financial goals. AOG Wealth Management offers various financial strategies that will help you grow your investments.

For more information on financial planning to help you achieve your goals, call us at (866) 993-0203.

Category: Wealth Management