Fed may raise short-term rates

WASHINGTON – The Federal Reserve Bank at its meeting this week is likely to discuss the possibility of it raising federal short-term interest rates as early as June.
The Fed cut its benchmark federal-funds rate to near zero in 2008 after the economic crisis, but Chairwoman Janet Yellen has publicly signaled that interest rates could increase as early as June if the economy remains stable between now and then.
The interest rate hike would effectively increase the cost of borrowing, which would have a resonating effect on the economy. Results could include a decline in business and home investment, decreased amount of goods bought on credit and a fall in asset prices.
Conversely, those who rely on interest on savings or revenue from lending would do better, as increased rates help savers and lenders.
The Fed has signaled it would like to move beyond the easy-money policies of the post-crisis period and while the job market has improved, inflation rates are less than the central bank’s targeted 2 percent, but Yellen expects it to rise.
The Fed’s hints of increasing the interest rate comes at a time when Europe and others are cutting rates and pursuing easy-money policies.
The Fed meets Tuesday and Wednesday.