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Investors should not fear a Fed rate hike

By Jill Cornfield · Bankrate.com
Wednesday, February 22, 2017
Posted: 5 pm ET
Win McNamee/Getty Images

Win McNamee/Getty Images

Interest rates could be on the rise "fairly soon," maybe even as early as March, according to the minutes from the Federal Reserve's most recent meeting.

That news comes at a time when the stock market is hitting record highs, which is causing a certain amount of nail-biting. The worry, of course, is that what goes up must come down. And some people are concerned about a huge market crash.

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If the Fed were seen as aggressive with rates, it could lead to a faster market slowdown, too.

But these hints at an increase should help prevent a scare.

Like the market itself, Fed chair Janet Yellen prefers transparency to uncertainty, says Brett Wander, chief investment officer of fixed income at Charles Schwab.

"Yellen has been dovish on rates for what feels like forever, and she's quite aware of the impact that the Fed can have on the market," he says.

Wander points out that Yellen wants the market to know what's coming in terms of policy. The economic data has improved recently.

"The latest employment report came in stronger than expected, with 227,000 new jobs created in January," he says. "Also, recent producer and consumer price readings were stronger than expected as well. If this trend of improving economic data continues over the coming weeks, a March rate hike will become increasingly likely."

“We are still at historically low interest rates," says David N. Waldrop, a Certified Financial Planner professional in El Dorado Hills, California. "As long as the increase in rates is gradual, it shouldn’t be something to fear.”

There's good news in a Federal rate increase, too.

Savers have gone for years without substantial return on their savings, and they will get higher returns. That's especially good news for those in retirement.

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