The Federal Funds Rate moved up last Wednesday a quarter of a point. That’s good news for financial lenders; that’s bad news for some borrowers who have to a pay a little more interest. Let’s say you have a substantial private student loan, home equity line of credit, adjustable mortgage, or really monstrous credit card bill. For $100,000 of debt, you’ll owe another $250 bucks in interest per year. Honestly, the 25 basis rate hike only has a marginal effect on borrowers. Markets seemed to absorb the bump in stride – with the yield curve flattening a bit, but equity markets hitting all time highs today. The bigger news about this hike is about psychology, confidence, and positioning – we’ve had a few rate hikes now and the futures market places even-odds on one more rate hike before the year is up, although it’s possible that the Fed will focus its attention on reducing its balance sheet (i.e. selling off its mortgage bonds) instead. Given all time market highs & very low unemployment, it’s difficult to justify the Fed’s accommodative policies of rock bottom rates and extraordinary propping of the bond market with active purchasing. We appreciate the fact that the Federal Reserve is clawing back some of its credibility, in case we will need maneuvering room in a future economy that isn’t so rosy.