What’s next for Fed after rate hike?

United States rates have remained at a target range between zero and 0.25% since December 2008.

“It’s certainly not 3.5 but it’s probably not 1.2 either”, the Tempo fund manager added.

Citing the central bank’s October meeting, the Washington Post put the odds that the Fed will vote on Wednesday to raise rates as topping 80 percent.

I wrote extensively about what to watch at the time of the Sept meeting.

While respondents on average see three rate hikes in 2016, they are actually quite divided: a third expects just two, a third expects as many as four and 21 percent look for three. The process will likely take several years, and there is heated debate over whether the pre-recession standards for a strong economy and appropriate monetary policy are even achievable.

The Fed´s policy body, the Federal Open Market Committee, meets on Tuesday and Wednesday to weigh raising the fed funds rate, a short-term peg for interbank lending which influences rates throughout the financial system, from 0-0.25 percent to an expected 0.25-0.50 percent. The cost of getting a loan has been close to free for the past few years, which is ideal during recessionary times: When loans are cheap, that encourages people, businesses, and investors to spend money, which stimulates the economy.

Persistently low inflation has been a big reason the Fed hasn’t yet lifted its benchmark rate despite strong job growth and near-normal unemployment of 5 percent, USA Today said.

The mechanics are complex, highly technical – and untested on a broad scale.

According to history, FED hike doesn’t signal crash of stock market, on the contrary there has been times, when it did well despite hike. “There is no obvious single “right” way to do it”.

The Consumer Financial Protection Bureau projects in a recent report that a quarter-point jump in the federal funds rate would cost credit card borrowers with ongoing balances $1 billion annually, and a full percentage-point hike nearly $6 billion.

The move to raise rates is prompted by a desire to keep the economy on track while enabling sustained growth and price stability.

Investors, however, believe those projections are too optimistic.

Other analysts suggest that while Fed officials want to move slowly, rising inflation could force them to accelerate the pace.

But the bar for changing course is unclear.

But keeping the interest rates and the flow of money where they’re at now could eventually start to hurt the country by fueling a whole new problem: inflation.

The Fed’s aggressive action, alongside unconventional policies such as quantitative easing – buying financial assets from commercial institutions and not just financial ones – helped the U.S. avoid a depression. “Managing the message will be central to the Fed’s communication effort with the markets”.

But Anthony Chan, chief economist for JPMorgan Chase, said any rate increases consumers see will be “marginal” and “gradual”.

Student debt: Interest rates on new federal student loans – the most common type – are tied to rates in the financial markets and are reset annually for new loans.