Wednesday's Fed news and you...

Hi —

Quick note on today's news, 

What happened: The Federal Reserve raised its benchmark interest rate by a quarter of a percentage point, to a range of 3.75%–4%. It's the first rate increase in more than three years, and the vote was surprisingly unanimous.

Why: Inflation is still too high with no real hints of it turning around any time soon if things remain the same — it's been above the Fed's 2% target for about five years now. New Fed Chair Kevin Warsh put it bluntly: "inflation is too high and has been for too long."  Fortunately, the job market is holding up well, which gives the Fed room for this flexibility.

What it means for you:

If you borrow: Expect credit card rates, HELOCs, and other variable-rate loans to tick higher. If you're carrying a balance or thinking about borrowing, you might be better off acting sooner than later.

If you save: The flip side — yields on savings accounts, CDs, and money markets should stay attractive. With rates possibly heading higher, there's no rush to lock in long-term CDs just yet.

If you invest: Stocks dipped on the news (the Dow fell about 1.2%), mostly, I think, because of the longer term implications... the Fed also signaled rates will stay higher for longer than previously expected. Short-term volatility after Fed announcements are normal. This is why we diversify. 

Personally, I think bond funds with longer "durations" will, and are getting, knocked around for a little while. This doesn't mean you shouldn't or should be in them, but we'll probably see some volatility in the short term. In the meantime though, they keep giving you your interest earned.

What comes next: The Fed meets again October 27–28 and December 8–9. Most officials expect one more quarter-point increase before year-end, but that depends on how inflation behaves in the coming months.

As always, this is general information, not personal advice. If you'd like to talk about what this means for your specific situation — your cash, your loans, your portfolio, your goals and concerns — just reply to this email or give me a call. I'm here for you.