Earlier today the Federal Reserve decided it was time to raise interest rates for the first time since 2006.  The thought was that they should start with an increase, over time, of 25 basis points.  This may seem like not very much, but really its the start of something more.  How much more? Nobody knows for sure (even Janet Yellen).

What does this mean for you, well probably not a lot.  In macroeconomics, we would teach students to expect a slight uptick in savings as interest rates become more favorable but in turn would also lead to lower consumption.  Really, the adjustment period or the interest rates will roll out over the course of the next year, as to give investors a lot of time to adjust to the changes.

So why did they raise the rates now.  Well, many economists believe that this was a good time to raise rates.  The zero lower bound was really getting in the way of monetary policy decisions.  With the increase in rates, it gives the Fed a little flexibility.  Also, inflation rates were not meeting the targets.  Raising the rates, hopefully will help in the long term to spur growth and meet that second mandate of the Fed.

Here is a link describing what happened, why, and what to expect now.