Interest Rates To Rise

Get Ready For Higher Interest Rates

The Federal Reserve raised short-term interest rates another notch Tuesday and suggested it will keep raising them gradually. The Federal Reserve has lifted its benchmark borrowing cost by a quarter of a percentage point to 1.75 per cent.

The Fed also reaffirmed its commitment to ''measured'' rate increases until they reach a more neutral level that neither stimulates nor dampens economic growth. The Fed has boosted the federal funds rate three times since June, when it was at a 45-year low of 1%.

The Fed's action applies only to short-term interest rates. Long-term rates, such as those on most fixed-rate mortgages, are subject to market forces and have already risen from last year's lows, although they have declined in recent weeks.

Still, Tuesday's rate hike will affect various forms of consumer and business borrowing tied to short-term rates, including adjustable-rate mortgages, home equity and auto loans, and some credit card accounts. Consumers will be paying slightly more each month to keep unpaid credit card balances.

Higher rates will slow the housing market, which has been a pillar for the economy in recent years, with booming home prices making homeowners wealthier and a refinancing frenzy putting more cash in consumers' pockets.