Rate Hike: End of Cheap Money Federal Reserve plans for a small increase in short-term interest rates mean an end to the four-year period of falling interest rates. With the economy heating up, the Fed wants to keep inflation in hand. If the Fed raises the interest rate from 1 percent to 1.25 percent, it is expected to be the beginning of the end of a period of historically low interest rates. NPR's Jim Zarroli reports.
NPR logo Rise in Federal Rate Ends Era of Cheap Money

Rise in Federal Rate Ends Era of Cheap Money

Fed Plans to Raise Interest Rates for First Time in Four Years

All Things Considered: Fed Raises Rate

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Part 2: Rate Fears Bring Rise in Home Prices

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Part 1: Home-Buyers Lock in Mortgage Rates

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Federal Reserve Board's decision ends period of 46-year lows. hide caption

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Federal Reserve Board's decision ends period of 46-year lows. hide caption

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The era of really cheap money is about to end, as the Fed moves to raise interest rates for the first time in four years, from the current 1 percent to 1.25 percent. Federal Reserve chairman Alan Greenspan, wary of inflation fears and hoping to solidify an economic recovery, had warned investors that rates would rise after the Fed board's scheduled June meetings.

In recent years, low interest rates helped fuel a housing boom that saw many first-time home buyers taking the leap. The boom also caused real estate prices around the nation to rise, as buyers scrambled to take advantage of the rates and sellers factored lower borrowing costs into their asking prices.

The 1 percent federal lending rate, which remained at a 46-year low for over a year, also helped ease the debt burden of Americans who turned to credit cards and short-term loans to ease the financial crunch brought about by layoffs and a soft job market.

In a three-part series, NPR reports on why the time of low-cost borrowing is at an end — and what it means to U.S. consumers.

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