Yesterday, the FOMC raised the overnight lending rate between banks another quarter point to 5.25%. While their initial statements seemed less hawkish and the overall markets rallied in response, it is worth mentioning that inflationary pressures still exist to some degree on the US economy. It appears that future rate hikes will depend on economic data and core inflation measurements going forward.
The bottom line is yields across the board in the treasury market have been slowly climbing higher and they should continue to climb if inflation indicators inch up. This may not bode well for bond and stock prices, but will help fixed interest rate products like c.d.’s and fixed annuity policies.
If the high price of energy continues to put pressure on the cost of goods, causing further inflationary pressures, we might expect the Federal Reserve to continue tightening interest rates. Any unexpected data or rate hikes will dampen investor spirits (putting downward pressure on the overall markets) but will benefit true fixed interest rate products. Now, more than ever, may be a good time to consider a fixed or floating rate annuity in order to diversify portfolios and reduce market exposure.
For current deferred, multi-year fixed annuity rates, please refer to: