What's going on?

The US Federal Reserve (�the Fed�) concluded its most recent meeting on Wednesday and no change in policy was made. While the Fed�s post-meeting commentary suggested that it was more likely to raise interest rates later this year than it was before the meeting, investors didn�t appear to see it that way.

What does this mean?

Since its last meeting, two important developments occurred: the Brexit vote didn�t create a financial crisis and the jobs market in America improved. There�s also been further evidence, like �retail sales,� that the economy is doing better than it was earlier in the year.


The Fed would like to raise interest rates partly so that it can cut them again when a future economic slowdown occurs (remember, lower interest rates help spur the economy by making it cheaper for people and businesses to borrow, and then spend, money). Since increasing interest rates creates somewhat of a headwind for the economy, the Fed only wants to do it if the economy is strong enough to withstand those headwinds.

Why should I care?

For markets: Markets seemed a little confused by the news.
Initially, the US dollar went up and US government bonds sold off – which suggests that investors thought an interest rate hike in the near term was more likely. But those moves reversed as the day went on. The ultimate takeaway for investors is probably that there wasn�t much new information coming out of Wednesday�s meeting.


For you personally: We�d be talking about a very small interest rate increase anyway!
All this talk about the potential for higher interest rates concerns a rise of just 0.25%, so it�s not going to have a huge impact on people�s borrowing costs (e.g. for mortgages). It�s likely that there would have to be signs that the Fed is going to increase interest rates numerous times before borrowing costs rose substantially.