Consumers Unlikely to Feel Sting of Rate Increase
If the Federal Reserve, as expected, raises short-term interest rates by a quarter of a percentage point tomorrow, many consumers, homeowners and smaller businesses will shortly be paying more when they borrow -- but not much more.</br></br>Banks likely will boost their 7.75 percent prime lending rates by the same quarter-point. Tied to the prime are rates for many home- equity loans, credit-card balances and small-business loans.</br></br>"I think you would see an industrywide increase of a quarter-point by the end of the week," said Wayne Ayers, chief economist at BankBoston. "The Fed would expect that and want to see it as well."</br></br>But even on a $20,000 loan, that would be only an added $50 in interest over the course of a year, some or all of which may be tax- deductible.</br></br>In terms of impact on the booming U.S. economy, however, that $50 would be just the tiniest tip of a very big iceberg.