Greatest winners and losers from the Fed’s interest rate conclusion

Immediately after its meeting on January 25-26, the Federal Reserve declared that interest rates would remain unchanged, with the federal funds rate remaining in a range of 0 to 0.25 percent.

Although interest rates have remained unchanged for the time being, Fed observers predict the central bank will raise rates multiple times in 2022, with a strong possibility that it will do so at its next meeting, held in March.

The Fed’s decision was widely anticipated. It comes when inflation is on the rise in the United States economy due to a robust rebound, supply chain concerns, and billions of dollars in fiscal stimulus.

While Federal Reserve Chairman Jerome Powell said that the bank would retain its low-interest rates, he also stated that the Fed would continue its faster reduction of bond purchases, first announced in December.

It is anticipated that this approach would diminish liquidity in the financial system more rapidly than originally anticipated. If the Federal Reserve maintains its current pace, it will cease its bond purchases in March.

Many Fed observers are afraid that if the central bank continues to put its foot on the accelerator for an extended period, it could worsen and maybe even entrench already-inflationary conditions.

However, it does not seem that the bond market is pricing in a significant increase in inflation for the time being. US 10-year Treasury rates fell in the first few months of 2021 after surging in the previous year’s first few months. They eventually settled slightly above where they peaked in March of last year.

As the Federal Reserve continues to trim its asset purchases while maintaining its interest rate stance, the winners and losers from the latest move are here.


While the federal funds rate has little effect on mortgage rates, which are mostly determined by the yield on the 10-year Treasury note, they are often going in the same direction as the federal funds rate for the same reasons.

Historically, the Federal Reserve has been a large buyer of mortgage-backed securities, which has helped stabilize the market and keep mortgage rates low. However, the Fed is rolling down those purchases more swiftly shortly.

Nonetheless, the yield on the 10-year Treasury note has soared in recent weeks as the market prices in the possibility of the Federal Reserve boosting interest rates.

According to Greg McBride, Bankrate’s senior financial analyst, “mortgage rates have increased significantly since the beginning of the year, reaching as high as one-half percentage point over late December levels at one point.”

It is expected that there will be spikes in interest rates this year as the Federal Reserve increases rates and begins to let part of its bond holdings expire. Still, there will also be moments when rates fall as a result of economic or geopolitical worries.”

If you’re trying to acquire a mortgage or can refinance an existing mortgage, the present climate remains favorable despite the recent increase in interest rates.

Since the epidemic’s beginning, demand for mortgages has increased as low-interest rates have made them more appealing. However, now may be the best moment to take action before interest rates rise any more in the coming months and years.

Affluent homeowners who cannot take advantage of low rates, whether because they are behind on their mortgage or because they have a fixed-rate mortgage and today’s rates aren’t nearly low enough to make it worthwhile to refinance, will lose out on this opportunity.

Furthermore, millions of jobless Americans cannot take advantage of cheap interest rates via a direct mortgage since they cannot demonstrate an income.

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Equity in one’s home

Because HELOCs respond very fast to changes in the federal funds rate, the cost of a home equity line of credit (HELOC) stays low despite rising interest rates. HELOCs are often tied to the prime rate, which is the interest rate that banks offer their most profitable clients to attract new business.

Because HELOC rates are still at historically low levels, people with outstanding balances on their HELOCs will continue to incur modest interest charges. 

A low-interest rate is also advantageous for people considering taking up a home equity line of credit, and now may be an excellent time to browse around for the best deal.

The low-interest rates on your HELOC are not beneficial if you are unable to take advantage of them – for example, some HELOCs allow you to lock in an interest rate on the part of your borrowing – in which case they are not beneficial. You may otherwise be paying less in interest.

Those that invest in stocks

The Federal Reserve’s resolve to maintain interest rates around zero for as long as it takes for the economy to recover has been a tremendous boost for the stock market. 

Low-interest rates are advantageous for stocks, making them seem more appealing than interest rates on bonds and fixed-income instruments such as certificates of deposit (CDs).

As long as the Federal Reserve maintained interest rates low and provided extraordinary support for the market, investors could maintain a floor under equities.

Following an initial decline in market prices in the weeks following the advent of the coronavirus in the United States, equities had a strong rally that lasted until 2021.

However, the Fed’s assistance is being curtailed in certain areas, such as the purchase of bonds, and interest rates are expected to rise in the future. And markets have already factored that in, with the S& P 500 down by more than 20% to begin the year.

“Because the cost of money is increasing in 2022, returns will not be as simple to come by as they have been in the previous 18 months or so,” says McBride. “Expect a bumpier journey, but most importantly, keep your long-term perspective in mind as you navigate through it.

Investors who are patient and disciplined will eventually reap the benefits of continued economic expansion and business profitability. You should not be distracted from your long-term aims by short-term volatility.”

Since November, when the Federal Reserve made it increasingly evident that it intended to decrease liquidity in the banking system, cryptocurrencies have also felt the pinch.

Bitcoin, Ethereum, and other major cryptocurrencies are far off their 52-week highs and have been on a steady decline for the last several months as investors priced in diminished government support as well as the possibility of higher interest rates in the future.

The federal government of the United States

Debtors prefer low-interest rates since it means they will owe fewer payments, and there is no greater borrower than the United States government, which borrows $1 trillion each year.

Due to the national debt’s almost $30 trillion size, low-interest rates continue to be a motivator for refinancing existing debt, providing the chance to save possibly billions of dollars as the government rolls its debt forward.

Of course, the government has reaped the benefits of a secular drop in interest rates for many decades. While interest rates may increase cyclically during an economic expansion, they have been consistently declining over the long run.

For the time being, interest rates on debt remain attractively low, with 10-year and 30-year Treasury bills yielding rates that are considerably below inflation. However, at some point, the government will be forced to begin refinancing its debt at greater interest rates.

Savings accounts and certificates of deposit

Banks will give poor returns on their savings and money market accounts due to low-interest rates in the economy. After the Federal Reserve reduced interest rates in early 2020, CD rates saw a significant dip that has never fully recovered. However, change may be on the horizon.

CD holders who have recently locked in rates will be able to keep such rates for the duration of the CD. Furthermore, consumers looking to purchase CDs may still be able to find a somewhat appealing offer if they search throughout the whole nation’s best rates.

Savings accounts have borne the brunt of reduced interest rates since most banks lowered interest rates as soon as the Federal Reserve made its emergency rate reduction in March 2020.

Nonetheless, a small number of banks are giving far better rates than their competitors, and with interest rates expected to climb shortly, it may be worthwhile to start looking for the best deals once again.

With interest rates rising, “where you keep your money will become more crucial,” says McBride, since many banks would be sluggish to pass on increased rewards to depositors.

“You want to be where your money is needed and where people are prepared to spend extra to get their hands on it. The online savings accounts that are now giving a competitive return will be the ones that are most likely to continue to give a competitive yield even if interest rates increase in the future.”

Savings account holders who want to maximize their interest earnings may consider using one of these online banks, which often provide rates far higher than those given by conventional financial institutions.

Credit cards are accepted.

As the prime rate, which is closely tied to the federal funds rate, changes, many variable-rate credit cards modify the rate, they charge users. As a result of the Fed’s decision, interest rates on variable-rate credit cards are expected to stay flat, at least for the time being.

If you have a credit card bill to be paid off, a low-interest rate is an excellent news. Nonetheless, it’s vital to put the low-interest rates in context since credit card rates are still among the most expensive types of consumer financing available, and rates seem to be on the verge of rising shortly.

Although interest rates have been low for some time, it may be a good time to look for a new credit card with a cheaper rate. If you don’t carry debt on your credit card, low-interest rates aren’t much of a concern at all.


Over the last year, inflation has been rising, and the Federal Reserve has been preparing the basis for an increase in interest rates shortly.

However, rates are still historically low, so it makes sense to think about how to take advantage of potentially higher rates in the future, whether that means getting a mortgage before rates rise even further or being more selective when it comes to shopping for rates on savings accounts and certificates of deposit.

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