7 Ways Higher Interest Rates Will Hit Your Pocketbook, Portfolio
The rate on the benchmark 10-year Treasury note has moved from 2.06% in September 2017 to a temporary high above 3.12% in May. The roughly 1-percentage-point increase is not much for those of us who remember when interest rates were in the double digits, but it is not the absolute level that matters. The important point here is that after many years of impossibly low rates, interest rates are trending higher.
Rising rates have implications for your finances. They affect the interest you earn on your investments. They affect the interest you pay on your loans, from mortgages to credit cards. They also affect the overall economy, which can then trickle down to your mutual funds and retirement plans. It also means there is a greater demand for money from businesses wishing to expand, hire more workers or build new plants.
Should you pay attention? You bet you should.
Kiplinger sees rates moving thanks to rising government deficits and slightly higher inflation. The Federal Reserve already is committed to raising short-term rates during the next several months because it's concerned about the tightening labor market.
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