AARP Eye Center
The Federal Reserve is raising borrowing costs to cool the hottest inflation readings in 41 years. The Fed on Wednesday hiked its key short-term fed funds rate to a range of 1.5 percent to 1.75 percent, the third of what the central bank expects to be a steady string of increases this year. The 0.75 percentage point hike is the largest since 1994.
Those rock-bottom rates that have starved your savings accounts but made it cheaper for you to borrow are expected to move steadily higher in 2022 and beyond, according to the Federal Reserve. That means it’s time for pre-retirees and those already in retirement to start mapping out a game plan to keep their finances in good order.

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Why rates are projected to rise
At the start of the pandemic in 2020, the economy plunged into a brief, sharp recession. The Fed, whose job is to fight inflation and keep the economy growing, slashed its key short-term fed funds rate to near zero and ramped up its bond-buying program to stimulate growth to revive the economy.
The Fed now has pivoted to a less stimulative policy to cool the economy and combat spiking inflation caused by pent-up demand, supply chain disruptions and, more recently, soaring oil prices caused by Russia’s invasion of Ukraine. In May, consumer prices rose 8.6 percent from a year earlier, its fastest pace since 1981. At the same time, the nation’s jobless rate fell to 3.6 percent, moving the job market closer to the Fed’s goal of maximum employment.
A win for income-starved savers
Though the Fed’s stimulus was successful in helping bring the economy back from the brink after the 2020 COVID-19 shutdown, it punished savers, especially retirees who rely on safe, steady income. Money stashed in money market funds, for example, currently pays just 0.63 percent interest, and a 12-month certificate of deposit, or CD, yields just 0.27 percent, according to the latest data from Bankrate.com.