Site Search

Latest News / The Good, the Bad and the Ugly of Interest Rates Hikes

The Good, the Bad and the Ugly of Interest Rates Hikes

May 17, 2022

The primary tool the Federal Reserve (the Fed) uses to conduct monetary policy is the federal funds rate. Changes in this rate influence other interest rates as well as broader financial and economic conditions.1 When inflation is too high, the Fed typically raises rates to slow the economy and help push inflation down. We saw that in March when the Fed approved a 0.25% rate hike— the first increase since December 2018—and again in May with a 0.50% increase. As inflation surges at the highest levels seen in more than 40 years,2 many economists expect rate increase to total 3%-3.25% by year-end.3 That makes it likely that rising interest rates will impact your wallet in the coming months. Whether that’s good, bad, or ugly depends on a number of factors.

The good
You may begin to see higher returns on short-term savings, such as bank savings accounts, certificates of deposit, or certain fixed-income investments. That reduces the need to take on added risk by investing money earmarked for short-term expenses in assets that fluctuate in value over time.

The bad
As interest rates rise, the cost of borrowing becomes more expensive as we saw earlier this year when 30-year mortgage rates soared past 5% for the first time in more than a decade.4 Homeowners who took the opportunity to lock in lower fixed rates on home loans in recent years will see no impact from rising mortgage rates. However, those with variable-rate mortgages or home equity loans should expect an increase in their interest payments going forward. As financing costs increase, homeownership becomes less affordable for buyers. While housing prices typically decline to attract more buyers when mortgage rates rise, it’s unclear if that trend will hold in today’s hot housing market where demand exceeds supply.

The ugly
When borrowing money, you want the lowest rate possible, especially when financing assets that will depreciate over time, such as a car, boat, furniture, or appliances. Even a slight increase could translate to hundreds of dollars more in interest over the life of the loan. Revolving credit card debt is another area where rising rates can get ugly. The higher the annual percentage rate (APR), the longer it can take to pay off credit card debt. While you can’t directly control the rates that lenders charge, you can take steps to ensure you get the best rate available, based on your credit history. Lenders consider your credit score when evaluating borrower risk. Ideally, you want yours to remain in the “very good” to “excellent” range.

To learn more about managing credit, visit If you have concerns about the impact of rising interest rates and inflation on your income in retirement, let’s schedule a time to talk.



3 4

Previous PostNext Post


Check the background of this investment professional on FINRA’s BrokerCheck

Located at: 600 E 84th Avenue Merrillville, IN 46410
Phone: (844) 755-6600

Securities and insurance products are offered through Cetera Investment Services LLC (doing insurance business in CA as CFG STC Insurance Agency LLC), member FINRA/SIPC. Advisory services are offered through Cetera Investment Advisers LLC. Neither firm is affiliated with the financial institution where investment services are offered. Individuals affiliated with this broker/dealer firm are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services.

These products and services are being offered through Cetera Investment Services LLC or its affiliates, which are separate entities from, and not affiliates of, Centier Bank or Centier Investments. Securities and insurance products offered by Cetera Investments are: *Not FDIC/NCUSIF insured *May lose value *Not financial institution guaranteed *Not a deposit *Not insured by any federal government agency.

Click here to view Cetera Investment Services Privacy Policy, other Important Information and Business Continuity Plan.

This site is published for residents of the United States only. Registered Representatives of Cetera Investment Services LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Investment Services LLC site at