Post image for Rising interest rates mar Fed’s stimulus efforts

Rising interest rates mar Fed’s stimulus efforts

by Adam Russett on December 15, 2010

Interest rates are up in spite of the Federal Reserve's bond-buying program and efforts to ramp up the economy. These developments give pause to those considering a mortgage or loan in order to finance their futures.

The U.S. Treasury's interest rates climbed to 3.47 percent on Tuesday, up an entire .2 percent in just one day and 1.1 percent since early October. Other interest rates went up as well, including 30-year fixed mortgage rates at 4.62 percent up from 4.17, the Washington Post reports.

However, the silver lining behind the rise stems from the fact that investors are feeling more positively and are not relegating their funds to bonds, which is encouraging, according to the news source.

At the moment, the Federal Reserve is vowing to maintain its $600 billion Treasury bond-buying program until it sees lower unemployment rates. The initiative should stimulate growth and keep short-term interest rates at an all-time low.

According to the Los Angeles Times, traders have pointed out that interest rates would be much higher if it weren't for these regular bond purchases.

The Reserve may also experience setbacks if the Bush-era tax cuts pass a House vote by the new year, which could potentially add $858 billion to the national deficit over the next two years.

The unemployment rate climbed to 9.8 percent last month, according to the Times.

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