Interest Rates Will Rise Modestly in 2015, Borrowing Costs to Remain Low

NEW YORK (MainStreet) — Interest rates are expected to increase only modestly later this year, which bodes well for consumers who plan to finance their purchase of cars and homes.

The Federal Reserve is expected to increase interest rates by June or later this year, which will only have a slight effect on mortgage and auto loan rates, CDs and credit card rates, said Greg McBride, CFA,’s chief financial analyst.

The Fed ended its quantitative easing program in 2014, which was intended to boost the economy and keep borrowing costs low for consumers after the Great Recession in 2008. Interest rates are currently at 0%, and increasing them too quickly could result in inflation, experts said.

Not all Federal Reserve bank presidents are in agreement that interest rates should rise this year. Chicago Federal Reserve Bank President Charles Evans told CNBC's “Squawk Box” on January 9 that an increase should be delayed despite the fact that the unemployment rate declined to 5.6% from 5.8%.

“We shouldn’t be raising rates before 2016 if things transpire as I’m expecting,” he said on CNBC. “I think employment growth has been very good for quite a long time now, and that’s been an important criteria for us to judge success. I’m in favor of being patient on raising interest rates.”

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The Fed is only likely to raise interest rates “a couple of times in small increments,” from its current 0% to 0.25% and then move to 0.5%, McBride predicts. The Fed and other experts are forecasting larger and more frequent increases.

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