Stronger economic data such lower unemployment will likely lead the Federal Reserve to raise interest rates at its meeting on Wednesday, the first hike since last December.

The consensus is that the central bank will raise rates by a quarter point, marking the second such increase during the past decade. Consumers have received a prolonged reprieve, enjoying rates at nearly 0%. Now they should expect their monthly payments to increase, especially if consumers have home equity loans and outstanding credit card balances.

The tone the Fed takes on Wednesday will be watched closely and the scrutiny will help determine the pace of hikes in 2017. The Fed will likely telegraph a relatively conservative message of two to three rate increases, said Bluford Putnam, chief economist for the CME Group, a Chicago-based derivatives marketplace. Although the central bankers will underestimate the number of hikes forecasted for 2017, the Fed could raise rates a total of four times, he said.

Inflation will rise higher next year than the Fed or the market believes and the largest factor is that commodity pries will no longer will be a drag, he said. The prices of crude oil, copper and other base metals have been rising.

"The market is comfortable with the Fed saying two to three increases and won't react too much," Putnam said.

The signs of inflation that the Fed was searching for are now appearing, said J.R. Rieger, global head of fixed income indices for S&P Dow Jones Indices.

"The Fed is probably in a place where it has to raise rates by 25 basis points," he said. "The market has built in this particular bump and is already reflecting that."

Consumers Face Higher Payments 

Consumers who are saddled with debt have saved thousands of dollars in interest with the Fed's delay in raising rates. Many current homeowners have taken the opportunity to refinance their mortgages into fixed rates, but others still have the chance to take advantage of these historically low rates.

Savers have taken the brunt of the lack of movement in rates. The returns for CDs and savings accounts will only increase nominally.

"Mortgage rates are still substantially below the levels before the recession," said Mark Hamrick, senior economic analyst at Bankrate, a New York-based financial data and content company.

If a series of interest rate hikes occurs during the next one to two years, homeowners with adjustable rate mortgages (ARMs) that will be resetting during that period of time will feel more of a "significant" impact, he said: "Rising rates will have an impact on affordability for many people."

A homeowner with a $200,000 mortgage at 4.75% will pay nearly another $100 each month compared to a $200,000 mortgage at 4%. Refinancing into a 15-year or 30-year fixed-rate mortgage can help consumers avoid additional increases in monthly payments.

Mortgage rates are not predicted to keep rising and could even decline nominally in the next few weeks, said Jonathan Smoke, chief economist for, a Santa Clara, Calif.-based real estate company.

"The Fed is likely to increase their target for short-term rates by a quarter point on Wednesday and twice that movement is already baked into current mortgage rates," he said. "As long as the Fed's announcement does not convey the likelihood of further aggressive moves early in 2017, rates will likely stay where they are and even drift down a bit through the end of the year. "

Rates have fluctuated during the past four years as home prices started recovering in early 2012. The 30-year mortgage rate fell beneath 4% for the first time at the end of 2011, averaging 3.99% and 3.96% in November and December, respectively, according to data from Freddie Mac. The monthly average 30-year rate has ranged from a low of 3.34% in December 2012 to a high of 4.49% in September 2013.

"While rates remained in a low range for four years, they also trended above 4% every summer, the peak of home sales, until this year," Smoke said.

In the aftermath of Brexit, rates in July, August, and September were "very close to the all-time lows," he said. "This was truly 'the summer of love' for buying with low mortgage rates."

Rates will likely remain above 4% for the foreseeable future and are likely to increase by another 50 basis points over the next 12 months, Smoke said.

"The movement we've already seen in rates puts us at levels last seen two years ago and we are 30 basis points away from the highest rates in five years," he said. "All eyes will be on how the Trump administration and new Congress implement new fiscal policies in 2017 to determine if economic growth and inflation are indeed heating up."

Higher rates will affect the amount of demand for housing and auto loans, said Josh Wright, chief economist of iCIMS, a Matawan, N.J.-based recruitment software company.

"The housing recovering has already been slow and affordability has suffered as prices have risen," he said. "Just when some cheaper supply was starting to hit the market, the higher rates will pull the rug out from under some first-time homebuyers."

Effect on Stocks and Retirement Portfolios

The Fed's effect on stocks will likely be a bullish one and bodes well for investors seeking greater returns for their retirement portfolios, said Edison Byzyka, chief investment officer of Hefty Wealth Partners in Auburn, Ind.

"It may not be a direct boost to significant gains immediately, but the asset allocation shifts that are likely to take place, a lot of which has started already, will force more people into equities rather than fixed income securities," he said.

Equities remain a better option for growth, but with the looming threat of higher inflation, stocks are a "smarter option, albeit volatility may be greater and slightly more frequent," said Byzyka, adding that "over the long-term, however, it's likely the most prudent approach."