Good news/bad news: interest rates rise

When interest rates go up - it’s complicated

By Morf Morford

Tacoma Daily Index

With every economic shift, some prosper and some suffer.

When interest rates go up (or down) there are many predictable (and about as many unpredictable) impacts.

There are winners and losers.

For those of us with investment or retirement accounts, an increase in interest rates means that our portfolios are worth more.

Low or stagnant rates mean that our investment accounts are also unmoving. Individual consumer savings accounts, for example, pay next to nothing.

Low rates, on the other hand, are great for those buying or taking loans – on a car or home for example.

The bottom line then, is, are we paying or receiving the impact of rising interest rates?

High or low, interest rates affect almost every one of us.

And as with every other underlying dynamic of our economy, we can become accustomed to it.

We can adapt to it if we know what to expect.

And, at least in one sense we know what to expect.

Rates are going up.

Global interest rates, like gas prices, cross borders, though most countries do their best to control their own interest rates.

Market forces tend to trump any national preferences.


Here in the USA, the Federal Open Market Committee (FOMC) consists of twelve members—the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis.

The rotating seats are filled from the following four groups of banks, one bank president from each group: Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas; and Minneapolis, Kansas City, and San Francisco.

The FOMC holds eight regularly scheduled meetings every year.

At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.

Stability and sustainability are the moving targets of this quixotic pursuit.

The FOMC see themselves hiking rates to around 2% this year. That implies a 25 point rate hike at each of the remaining six meetings in 2022 and possibly even higher rates to come.

The FOMC analyzes and makes projections about the approaching economy.

The projections made in March and June are for the current year, for the subsequent two years, and for the longer run.

The projections made in September and December are for the current year, for the subsequent three years, and for the longer run.

The longer-run projections are the rates of GDP growth, inflation, and unemployment to which a policymaker expects the economy to converge over time—maybe in five or six years—in the absence of further shocks and surprises and under appropriate monetary policy.

In short, the FOMC looks back, looks forward and make their best estimates about where the economy is going – with one eye on where they (or we) would like it to go.

If you want to know about FOMC, look here:

And if you want to look at the primary source material and make you own projections about the coming economy, take a look here:

More than an hour on this page should earn you an honorary Boy Scout medal in economic nerdness.