Interest rates may climb in 2015

In the last few months of 2014, we saw the job market make gains, consumers pay less at the pump and the overall economy continue its recovery from the Great Recession.

Businessman predicting rates with a crystal ball © aphaspirit/

Additionally, we witnessed the Federal Reserve's bond-buying program come to an end. As it unravels its stimulus strategy, the central bank is likely to raise rates in 2015.

"The Federal Reserve is likely to boost its short-term interest rate target around the middle of next year if economic growth continues to be solid as the Fed -- and we -- currently expect," predicts Lynn Reaser, chief economist for Point Loma Nazarene University in San Diego. "The Fed will move gradually, taking its target rate up to around 1 percent from near zero at the present time."

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But how will the Fed's actions affect interest rates on mortgages, bonds, certificates of deposit, credit cards and auto loans?

"Bond yields and mortgage rates will begin moving higher as the timetable for Fed interest rate hikes comes into focus, with rates on credit cards, auto loans and home equity lines of credit responding after the fact," says Greg McBride, CFA, Bankrate's chief financial analyst. "The bulk of next year's increases will come in the back half of the year."

Here's a deeper look at how interest rates will perform in 2015.


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