The Feds met on Wednesday and Charmain Powell signaled that they will likely raise rates 3 times next year.
But what does that actually mean?
When the Feds raise interest rates, they only raise what’s called the “Fed Funds Rate” which is the interest rate that bank’s lend money to each other overnight.
(You didn’t know banks did that, did ya?)
And that small, short-term interest rate trickles through the rest of the economy.
When they increase rates, they slow down (or tighten) the economy.
Inflation is a result of too much demand chasing too few goods which drives prices up.
So when you slow down the economy you, reduce demand because it’s more expensive to borrow money to buy things.
What does that mean for you?
It means mortgage rates will probably go up next year, so if you haven’t refinanced recently you should probably jump on it.
That also means you might earn more than 0.000001% in your savings account next year.
Inflation decreases how much stuff one dollar can buy. So when the Fed raises rates they are trying to make your dollar worth more.
You know what else makes your dollar worth more?…
FRIDAY FUN
A long time ago coins were valued based on the amount of gold or silver they contained.
To make a little money, some less than honest folks would shave off a little from the coins and then sell the gold and silver.
To prevent this governments starting putting ridges on the coins, so you would know if it had been shaved or not.
And that’s why you’ve got ridges on half-dollars, quarters and dimes!
Have a great weekend!
