I hope you’re enjoying the beginning of fall! My family has been busy since my last Quarterly Perspective. We moved into our new home this summer and, on August 8th, welcomed our second daughter, Avila, to the family. Needless to say, it has been a busy few months!
Interest rates have also been a big topic in the financial news lately. You may have heard that the Federal Reserve is expected to raise its target interest rate again this week, as inflation has remained more stubborn than hoped. [1]
But what does a quarter-point increase actually mean for you?
Interest rates are one of the most important levers in the financial system. Whether you have a mortgage, earn interest on your savings, live off a bond portfolio, are considering a large purchase, or simply watch your investment account, interest rate changes likely affect you in some way.
In other words, rates show up almost everywhere.
The Good and the Bad of Higher Rates
Higher rates certainly have some downsides.
For borrowers, they make mortgages, auto loans, credit cards, and business loans more expensive. A higher mortgage rate can add hundreds of dollars to a family’s monthly payment (I’m well aware!), while businesses may decide to postpone expansion when the cost of borrowing rises.
Higher rates can also put pressure on stocks as bonds and cash become more attractive.
But there is a flip side.
Higher rates can be good news for savers. After years of earning almost nothing on cash, people can now earn some meaningful interest from savings accounts, money market funds, CDs, and Treasury bills without taking much investment risk. New bonds also offer higher yields, which is good news for investors building income-producing portfolios.
They can also help with the problem that started this whole conversation: inflation.
The Federal Reserve uses interest rates to help balance two competing goals: keeping inflation under control while maintaining a healthy labor market. When inflation stays too high, higher rates can act like a brake, slowing borrowing and spending and easing pressure on prices. [2]
The government doesn’t escape the consequences either.
The federal government has borrowed a lot of money, and that debt comes with an interest bill. As older debt matures and is refinanced, higher interest rates can increase the government’s interest expense. In 2025, interest on debt held by the US government was roughly $987 billion. [3]
Yes, almost $1 trillion with a “t.”
That’s a pretty significant expense, and it’s another reason interest rates matter far beyond our own mortgages and investment accounts.
What Should Investors Do About It?
Probably less than the financial news would have you believe.
Interest rates will rise and fall throughout our investing lives. Sometimes higher rates will hurt stocks. Other times they will create better opportunities in bonds or make borrowing more expensive.
That is exactly why we build diversified portfolios in the first place. They are designed to weather these changing conditions.
The key takeaway: Interest rates matter, but predicting them is another matter entirely.
The financial news will always have an opinion about where interest rates are headed. But even professional economists have a difficult time consistently getting these forecasts right. Dimensional Fund Advisors has studied this question extensively and concludes that there is no reliable way to predict changes in interest rates. And even knowing what the Fed will do with short-term rates doesn’t necessarily tell us what longer-term rates will do. [4]
So rather than trying to position your portfolio around the next rate move, I think it’s more productive to make sure your overall financial plan is prepared for different possibilities. Sometimes rates will rise. Sometimes they’ll fall. Sometimes they’ll surprise everyone.
We don’t need to know which one is coming to have a good financial plan.
That’s really the goal of financial planning: making good decisions today without needing to know exactly what tomorrow will bring.
There will always be another inflation report, Fed meeting, or market headline to react to. Our job is to keep those headlines in perspective and focus on the things we can actually control.
Thank you for the trust you place in Fidelis Financial. It is a privilege to help you steward the resources God has entrusted to you and your family.
Will
Will Odland, CFP®, CKA®
Founder, Financial Advisor
[1] Reuters, September 14, 2026.
[2] Federal Reserve, Monetary Policy Report, July 2026.
[3] U.S. Treasury, Financial Report of the United States Government, Fiscal Year 2025.
[4] Dimensional Fund Advisors, “Where Are Interest Rates Headed?” August 1, 2025.
This material is provided for informational and educational purposes only and should not be construed as individualized investment advice or a recommendation to buy or sell any security. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit or protect against loss. Economic and market conditions are subject to change, and forward-looking statements or expectations may not occur as anticipated.