the federal reserve just raised interest rates by 075 and plans to keep doing so until it is satisfied that inflation is under control according to cnbc what you should do about it depends on where you sit   investors if you are investing in stocks and bonds to accumulate wealth for retirement what you should do depends on how long before you retire if you are not retiring for five or more years buy a stock index fund as the fed keeps raising rates and stocks go down   savers if you are retiring sooner than that or you are already retired put your money in an online savings account it will not let you keep up with inflation but it will somewhat minimize the damage   borrowers if you must borrow money pay off as much of your debt as you can try to convert your floating rate debt into fixed rate if you borrow on your credit card move as much as you can into the lowest interest rate card you can find why is the fed raising interest rates today the fed raised its federal funds rate up to a range of 3 to 325 the highest it has been since early 2008 the fed has done what i think is an excellent job of communicating its strategy which is to keep raising interest rates aggressively eg by 075 at each meeting until inflation goes way down and there is a long way to go specifically with august inflation rate at 83 it is clear that the fed will be raising rates aggressively until inflation is clearly heading down rapidly to its target rate of 2 indeed i found it surprising that the fed seems to be signaling that it will stop raising interest rates next year but it did just that “signaling the intention of continuing to hike until the funds level hits an end point of 46 in 2023 that implies a quarterpoint rate hike next year but no decreases” according to cnbc my surprise is that the fed seems to think that will be enough to tame inflation meanwhile the fed expects its interest rate increases to push the economy close to a recession as cnbc reported that means the fed expects gdp growth to slow to 02 for 2022 rising slightly in the following years to a longerterm rate of just 18 meanwhile the fed expects its rate increases the throw people out of work fed officials expect the unemployment rate to rise to 44 by next year from its current 37 “increases of that magnitude often are accompanied by recessions” noted cnbc and the fed now thinks that inflation excluding volatile food and energy prices will not decline from its current 45 to around its target hitting 21 until 2025 what long term investors should do since rising interest rates mean lower stock prices it is quite painful for me that the fed will keep hiking interest rates to make my pain go away i could sell all my stocks so they would stop going down but as someone who believes that stocks outperform other investments over the long run i am doing nothing to alleviate that pain instead i keep investing in stocks every month as they go down that strategy makes sense for longterm investors who have the time to suffer over the next few years until they can enjoy the inevitable recovery of stocks that will surely happen once inflation goes below 2 and stays there for a few quarters at that point the fed will stop raising interest rates and start cutting them in my view there is no reason to own bonds until it is clear that their prices will go up and as long as the fed remains poised to increase interest rates the risk of holding bonds is greater than the potential reward what savers should do for those who need to maximize their income from investments and savings should look for savings accounts that are paying higher rates albeit way below the fed funds rate a case in point is goldman sachs’s marcus according to the wall street journal “six months ago a 1000 account there would net 05 in interest now the same account is offering 19 in annual percentage yield” online accounts due to lower overhead expenses can pay even higher interest rates according to cnbc “topyielding online savings account rates are as high as 25 much higher than the average rate from a traditional brickandmortar bank” another option is government bonds yields on 1year treasury bills and the 2year note are “hovering at 4 rising from near 0 a year ago” noted marketwatch sadly these interest rates fall way short of the rate of inflation so savers are inevitably going to suffer a loss in real spending power what borrowers should do meanwhile savers’ pain is the banks’ gain that’s because interest rates on credit cards mortgages and car loans are going up right away how so as the wall street journal wrote “before the fed’s move the average fixed rate on a 30year mortgage recently rose to 602 from 416 the week of march 17 and additional rate increases would likely push mortgage rates even higher” credit card interest rates are rising and likely to continue to do so “the credit card apr rose from “around 1617 in early march to more than 18 in september” that rate is inevitably rising meanwhile the average apr on a fiveyear car has risen over the past six months from 398 to 507 according to bankrate borrowers should try to pay off their debts as much as they can and lock in the lowest rate they can find