The Fed raises interest rates again

On November 1, 2005, the Federal Reserve Bank [Fed] raised interest rates a quarter of a percentage point. Since the summer of 2004, outgoing Fed Chairman Alan Greenspan has been raising interest rates on a regular basis since they hit their lowest point of just 1%. Now at 4%, Greenspan is expected to raise rates two more times before leaving office in January 2006. Will higher rates stave off inflation? Will the new president continue Greenspan’s incremental hikes or let rates stabilize? Speculation is rampant, but there’s one thing you can be sure of: he’ll pay more for many of life’s expenses.

A rate hike by the Federal Reserve means you’ll probably pay more for something that includes:

Credit cards. Not known for showing much restraint, you can bet that credit card companies will continue to raise interest rates for all but their best customers. Rates of 12, 15 and even 21% or more are reappearing.

Mortgage rates. Fixed-rate mortgage holders are fine, but those with variable-rate mortgages will pay more. Much more if they have not felt previous rate increases and their mortgages must be adjusted upwards. More money to pay mortgages means less money for disposable items.

Why loans? If you need a new car and can still find zero percent financing, then take advantage of the offer. Because loans, personal loans, home equity loans, home equity lines of credit, loan consolidations, will continue to increase.

Add in high fuel prices, anticipated increases in medical costs, and Americans are being squeezed. With the holiday season fast approaching, retailers will have to cut prices to attract customers with dwindling cash reserves.

For people who don’t have excessive debt, the Fed’s interest rate hike will have little or no effect on them. For everyone else, the pinch is on!