Consequences for consumers

US consumers also will feel the change after major banks have already announced that they will raise interest rates on some loans. J.P. Morgan Chase, Wells Fargo, Bank of America, Citigroup and others. They said institutions to increase primary interest rate, which is the basis for determining the price for various types of loans, including credit cards. The increase will be 3.25 to 3.5% and came into force this week.

Rise in cost of credit is expected to have a negative impact on certain sectors such as automotive. According to a J.D. Power will reduce demand for new cars in the US with about 150 thousand. In the next 12 months, or one percent of the total market.

Unchanged

Since deposit rates typically lag a few months against movements in loans, investors probably will not feel the difference after the Fed decision. “The huge transfer of wealth from savers to debtors of the past seven years is likely to continue. Depositors are the last to benefit from interest rates rise,” said Kristofur Wallet, director of Kroll Bond Rating Agency.

Banks will be able to increase interest rates on loans, but it can have a negative impact on their profits, if there is still a growth of interest they must pay on deposits. Since individual banks are not identical positions to the different business sectors, the rise in interest rates will affect them differently. The Fed’s actions will have little effect on commodity prices, whose collapse is among the main concerns in the markets.

Too late?

For myself Fed raising interest rates is not straightforward. On the one hand, the institution may consider that it has achieved its objective of stabilizing the economy and financial system, whose prospects seemed bleak seven years ago. According to some experts, however, the Fed is too late with this move. “The dice may already be cast and are on the path to the next recession. Concerns in this regard are not related what the Fed does next, but that did not start tightening much earlier,” says Paul Mortimer -Liy, chief economist of BNP Paribas North America.

Comments are closed.