The Federal Reserve on Wednesday May 4, 2022 announced that it will raise its Federal Funds rate by 50 basis points (half a percentage point).

This will mean that you as a borrower, financing your debt will be a little more expensive. Car loans, mortgages, credit card debt will be more expensive to service now. Interest rates going higher means of course higher interest on the money you owe.

Unless of course you locked in on a low interest rate, then you are fine, like locked in a 30 year mortgage at 4% fixed rate, then don’t panic your interest rates will not go higher. Interest rates on credit cares and debt with variable interest rates will be going higher.

On the other side higher interest rates make saving more appealing. Higher interest rates will also lead to higher yields on treasury and other debt securities. Those with money saved can now invest at their savings at a much higher interest rate than say in January 2022.

On the other flip side, higher interest rates will smack growth stocks that typically carry debt on their balance sheets, and other highly levered companies. They too will be facing higher interest payments, so expect to see their share prices get smacked. Older technology companies like Microsoft, Apple, Google, Facebook don’t really need to worry all that much because they have plenty of cash on their balance sheet. Its more of the newer start ups that need to worry because they have borrowed and now their interest rates will cut into their overall profit margin.