FOMC will start selling assets in October, meaning ....

babyme

If the Fed buys bonds in the open market, it increases the money supply in the economy by swapping out bonds in exchange for cash to the general public. Conversely, if the Fed sells bonds, it decreases the money supply by removing cash from the economy in exchange for bonds. Therefore, OMO has a direct effect on money supply. OMO also affects interest rates because if the Fed buys bonds, prices are pushed higher and interest rates decrease; if the Fed sells bonds, it pushes prices down and rates increase.

Read more: The Fed's New Tools For Manipulating The Economy http://www.investopedia.com/arti ... n.asp#ixzz4tJaz9XMJ
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mmpleaser

What does this mean for my savings or debt? Federal Reserve economists estimate that quantitative easing lowered the yield on the 10-year Treasury note by one percentage point. This matters because the 10-year Treasury is considered a benchmark in the U.S. economy, influencing other interest rates on corporate bonds, mortgages and business loans.

[See: 9 Ways to Invest in America With Bond Funds.]

Just as quantitative easing helped to lower interest rates for borrowers, the unwinding of the policy should gradually lead to higher interest rates on everything from your savings account to 30-year mortgages and auto loans. "The Fed bought bonds to drive interest rates down, and very slowly over time, as they reduce their holding of bonds, that will mean long-term interest rates will move higher," says Julia Coronado, economist and founder of MacroPolicy Perspectives. "They're trying very hard to make this as gradual and orderly and predictable a process as possible."

As a result, consumers and business owners should be prepared for loans to become more expensive. This is not necessarily a bad thing, though. The economy is on stronger footing, unemployment is low and the stock market is at record highs. It's only natural that interest rates should rise, Caranci says.