The era of cheap credit will continue

Published 9:44 am Thursday, March 19, 2015

NEW YORK — Nobody knows when exactly, but the day will eventually come when the Federal Reserve nudges its benchmark lending rate from next to zero to something slightly higher.

When that happens, it will put upward pressure on borrowing rates throughout the economy — for credit cards, mortgages and student loans. But that doesn’t mean the era of incredibly low interest rates will soon be over.

The Fed’s chair, Janet Yellen, has taken pains to be cautious. On Wednesday, the central bank gave more signals that it will move slowly toward its first interest-rate increase in nearly a decade. By the end of the year, Fed officials expect the benchmark rate will reach 0.625 percent.

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It was a different world the last time the Fed began a series of hikes. Rates were already much higher than today. In June 2004, the Fed lifted its benchmark rate from 1 percent to 1.25 percent. By the time the Fed was finished in 2006, the rate had reached 5.25 percent.

Nobody expects anything like that now. With the economy still growing slowly and inflation minuscule, rates will likely hover near historic lows. The Fed doesn’t want to ratchet up the monthly payments on your credit card. It’s in no rush.