An Interest Rate Increase Is Long Overdue
The highly anticipated rise will be good for savers and investors.

Federal Reserve Chairwoman Janet Yellen is at it again—hinting that the time might finally be right to raise interest rates.
Here's hoping it finally happens this year.
What should you do if it does? If you are risk-averse, you can take advantage of the higher yields from bank products such as certificates of deposit, money-market accounts and savings accounts. For those who have exposure to the markets, evaluate your current stock and bond market exposure and make necessary adjustments.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The last time the Fed increased rates was December 2015, and an expectation was set at that time—based on the strength of the economy and the labor market—that we would see three to four increases in 2016. So we waited and watched and... nothing.
If the Fed comes through in December, it will be welcome news. As former FDIC Chair Sheila Bair said recently, "We've been keeping interest rates far too low for far too long." The increase needs to be slow and gradual, she told FOX Business Network, "but they need to get on with it."
I agree. The Fed has been roundly criticized by economists and politicians for propping up the U.S. economy, distorting the market and creating a bubble that's doomed to burst. And Yellen has earned a reputation as an interest-rate tease, bouncing back and forth between optimism and pessimism—and taking the American public with her. (The job market is doing well. Yay! But, hold on, there could be significant repercussions from the Brexit. Ohhh!)
Meanwhile, if you're looking for a way to save and invest, you're being punished. If you put your hard-earned dollars in a money-market account or certificate of deposit (you know, the way your risk-averse but savvy-about-saving parents and grandparents did?), you're actually losing money. And you have been for years. Because if you're making 1% interest, and inflation is 1.5% to 2% (those are the Fed's figures, by the way), you're simply not keeping up.
This is especially unfair to older workers who want to move from stocks and bonds to something more conservative as they prepare to retire and to elderly Americans on a fixed income, who rely on interest income to cover their living expenses.
Raise the interest rate, and they'll likely loosen their purse strings, which benefits the economy. And younger investors might learn to keep some money outside of the volatile market—in savings—and use that, instead of credit, to pay for high-ticket items. Imagine that.
We're ready. The Fed's year of waffling sends a message that, when it comes to the economy, at least, things aren't so bad—bumpy, perhaps, but not bottoming out. And a higher interest rate gives the market somewhere to go if things really do go south.
If you remember back to the terrorist attacks in 2001, the interest rates were up around 4% or 5%, which gave the Federal Reserve some wiggle room to reduce rates and bring some calm to the financial markets. When you're at 0%, what are you going to do? There isn't any room left.
Yellen continues to say the Fed's decision on rates will depend on economic data and not a preset timetable. Let's just hope when the increase finally comes, it isn't too little too late.
Christopher A. Murray is a professional financial adviser, insurance professional and president of the Maryland-based Murray Financial Group. He is a Certified Fund Specialist and Board Certified in Mutual Funds.
Kim Franke-Folstad contributed to this article.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Christopher A. Murray is a professional financial adviser, insurance professional and president of the Maryland-based Murray Financial Group. He is a Certified Fund Specialist, Board Certified in Mutual Funds and a Certified Senior Consultant. Murray has produced and hosted the weekly "Your Financial Editor" radio show for 17 years and provides daily business and financial market updates. He is an active member of the National Press Club and has contributed to several publications, including "The Wall Street Journal."
-
Stock Market Today: Trump Retreats, Markets Rejoice
Stocks rally, yields soften, the dollar rises, and even beaten-down names enjoy the wages of potential trade peace.
By David Dittman
-
In Trump’s Economy Should 401(k) Savers 'Set It and Forget It?'
It’s hard to bury your head in the sand when the markets are volatile. Here’s when it makes sense and when it doesn’t.
By Donna Fuscaldo
-
Bouncing Back: New Tunes for Millennials Trying to Make It
Adele's mournful melodies kick off this generation's financial playlist, but with the right plan, Millennials can finish strong.
By Alvina Lo
-
Early-Stage Startup Deals: How Do Convertible Notes Work?
Some angel investors support early startups by providing a loan in exchange for a convertible note, which includes annual interest and a maturity date.
By Murat Abdrakhmanov
-
SRI Redefined: Going Beyond Socially Responsible Investing
Now that climate change has progressed to a changed climate, sustainable investing needs to evolve to address new demands of resilience and innovation.
By Peter Krull, CSRIC®
-
Here's When a Lack of Credit Card Debt Can Cause You Problems
Usually, getting a new credit card can be difficult if you have too much card debt, but this bank customer ran into an issue because he had no debt at all.
By H. Dennis Beaver, Esq.
-
Going to College? How to Navigate the Financial Planning
College decisions this year seem even more complex than usual, including determining whether a school is a 'financial fit.' Here's how to find your way.
By Chris Ebeling
-
Financial Steps After a Loved One's Alzheimer's Diagnosis
It's important to move fast on legal safeguards, estate planning and more while your loved one still has the capacity to make decisions.
By Thomas C. West, CLU®, ChFC®, AIF®
-
How Soon Can You Walk Away After Selling Your Business?
You may earn more money from the sale of your business if you stay to help with the transition to new management. The question is, do you need to?
By Evan T. Beach, CFP®, AWMA®
-
Two Don'ts and Four Dos During Trump's Trade War
The financial rules have changed now that tariffs have disrupted the markets and created economic uncertainty. What can you do? (And what shouldn't you do?)
By Maggie Kulyk, CRPC®, CSRIC™