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10 Fast Facts About Interest Rates and Annuities

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The Federal Reserve Board announced Wednesday that it will be phasing in a big increase in a closely watched interest rate — the federal funds rate.

That’s the rate big banks use when lending to each other.

The Fed hopes to move the rate up, in steps, to 1.9% by the end of the year, from near zero today.

The Fed does what it can to cut rates when the economy is weak, to help home buyers, and to help business owners who need to borrow money to expand.

The Fed tries to move rates higher when the economy seems to be strong and prices are rising, because of a belief that higher interest rates curb inflation.

Life insurers like thinking about what higher rates could do for the yields on their huge investment portfolios.

Over time, steadily rising rates could make stars out of annuities with benefit guarantees.

For a look at 10 other things to know about annuities and interest rates, see the gallery above.


(Image: Maxim Kazmin/Adobe Stock)