4 ways in which the rise in the rate of the Fed impacts the u.s. – Expansion MX

(CNNMoney) –

The high rates will return to the united States.

The Federal Reserve raised its key interest rate on Wednesday to a range of 0.50 to 0.75%, its second increase since 2006. The first was in December of 2015.

The increase of a rate will not change the world, but the process of raising the rate affects millions of americans. If you have credit cards or a savings account, invest in stocks or bonds, you want to buy a house or car, pay attention.

The Federal Reserve put the rates at 0 in December 2008 to revive the real estate market during the Great Recession. Now, the united States is in a period of crisis and the economy can support paying higher rates. The increase in the rate is a sign of improvement in the u.s. economy.

this is how you could affect the increase in the interest rate:

1. Savings accounts pay the most

savers americans have had difficulties for years, getting almost nothing in the bank. Now could be a step closer to the light at the end of the tunnel and gain a little more interest on their deposits of savings account.

When the Federal Reserve raises rates in the short term, banks pay more interest to the users for their deposits. But how much and how fast will depend on how much you raise the rate on the Reservation.

to start noticing the difference, could spend one or two years at least, experts say. After all, the Federal Reserve raised the rate by only 0.25% this Wednesday. The officials may say that it will raise rates two or three times more next year, but that could change quickly depending on the performance of the economy.

Lee: The Fed and the NAFTA, the challenges for the mexican economy in 2017: HR Ratings

last December, the Federal Reserve said it would raise rates four times in 2016. But that didn’t happen. This week it made its first hike of the year.

In conclusion: the rise in the rate on Wednesday is good news for savers, but still need to be patient.

2. For big buyers: rates rise, but remain low

while the Federal Reserve controls the interest rates in the short term, their decisions impact partially to the interest rates of the long-term mortgages. The increase in the rate does not guarantee that the mortgage will increase. Last year, the Federal Reserve raised the rate and mortgage rates declined this year.

however, the increase this time comes in a time in which the interest of a 10-year bond is rising. And mortgage rates are linked to the instrument to 10 years, whose performance has increased rapidly to about 0.7% since the election.

The fixed rate typical for a 30-year mortgage is close to 4.1%. Has increased significantly since the elections for the president-elect Donald Trump promises to cut taxes and increase spending, which triggered the volatility in the u.s. bond.

Before the elections, a mortgage type typical 30-year was at 3.5%, according to Freddie Mac. So the rates have risen rapidly, but remain at low. During the last economic expansion, from 2001 to 2007 mortgage rates were between 5% and 7%. In the 1990s, the rates were even higher, moving between 7 and 9%. With the time, to the time that the Reserve lifts rates, it is expected that the mortgage rates will also increase.

3. The Federal Reserve will probably not finish the rebound in the stock market Trump this Wednesday

The stock market used to tremble with the mere hint of a hike in the rate. When the fed raises rates, it increases the borrowing costs for the companies, strengthens the dollar, and may hinder the spending plans. All of these factors can tighten the income.

But the promise of Trump to accelerate the infrastructure spending and lower corporate tax rates has led to the stock market to a higher level than ever. And almost all, 97% of investors forecast that the rise in the rate would arrive this Wednesday, so it was not a surprise.

however, if the Reserve begins to raise rates faster than expected next year, the glory of the stock market could face some bumps with the increase in the borrowing costs and the strengthening of the dollar.

A strong dollar tends to become more expensive and less attractive american products, like the iPhone, to foreign buyers.

that Is to say, investors will not eat the nails unless the president of the Federal Reserve, Janet Yellen, indicating rates will rise faster.

4. Trump may have to manage a Federal Reserve extremist

The big spending plans the president-elect could raise the demand for all kinds of products. The high demand could increase the pace of inflation, which has been lagging in recent years and is one of the big reasons why wage growth has been slow.

If inflation increases, the Federal Reserve could raise rates more quickly to keep pace.

Along with the mortgage rates, the higher rates increase the interest payments of credit cards and auto loans. This could reduce the appetite for consumption of the buyers.

consumers represent the largest part of the economic activity of the united States. However, the rates are very low. The Federal Reserve has tried to boost the economy from the Great Recession, with interest rates extremely low. Trump called him "a false economy" during his campaign.

we Recommend: Christmas will come sooner to Janet Yelle and the Fed

In any case, the weight to boost the economic growth is changing from Trump to the Federal Reserve. The role of the central bank will decrease by increasing the action of the government. Trump promises to rebuild roads, bridges and tunnels.

But both sides are certainly looking at different crystal balls. Trump promises an annual growth of 4%. The Book projected an annual growth rate of 2% until 2019.