WASHINGTON - Consumers will likely pay more for home loans. Savers might earn a few more dollars on CDs and Treasurys. Banks could profit. Investors might get squeezed. The Federal Reserve's move Wednesday to slow its stimulus will ripple through the global economy. But exactly how it will affect people and businesses depends on who you are. The drop in the Fed's monthly bond purchases from $85 billion to $75 billion is expected to lead to higher long-term borrowing rates. That means loan rates could tick up, though no one knows by how much. Here's a look at the likely effects of the Fed's decision: CONSUMER AND BUSINESS LOANS Mortgage rates have already risen in anticipation of reduced Fed bond purchases: The average on a 30-year U.S. fixed-rate mortgage has increased a full percentage point this year to 4.47 percent. Analysts said it will likely head higher now. "Homebuyers aren't going to be happy," said Ellen Haberle , an economist at the online real-estate brokerage Redfin. "In the weeks ahead, mortgage rates are likely to reach or exceed 5 percent." An improving economy means stronger sales for businesses, even if they, too, have to pay a bit more for loans. And rates on auto, student and credit card loans are unlikely to change much. They're tied more to the short-term rates the Fed is leaving alone. SAVERS Savers have suffered from the Fed's low-interest rate policy. Wednesday's move could offer some relief to people who keep money in three- and four-year CDs. But it probably won't mean a big jump from, say, the average 0.48 percent rate on 3-year CDs. "They're starting from such a low point, it's not going to be nearly enough to make three- and four-year CDs anywhere near compelling," said Greg McBride , senior financial analyst at Bankrate.com . By keeping short-term rates near zero, the Fed move does nothing for people with money in savings accounts and very short-term CDs. BANKS Banks earn money from the difference between the short-term rates they pay depositors and the longer-term rates they charge consumers and businesses. The gap reached a five-year low in the middle of this year. But it's likely to widen as longer-term rates rise and short-term rates stay fixed. Bank profits should rise as a result. FINANCIAL MARKETS A Dow increase might not last. "As the tapering continues, there will be less liquidity going into the stock market," and the rally will either slow or end entirely, said Sung Won Sohn , an economics professor at the Martin Smith School of Business at California State University . Over the past year, the super-low U.S. rates had led investors to seek higher-yielding investments in emerging markets. Last summer and fall, speculation about a slowdown in the Fed's stimulus sent stocks tumbling in the developing world.
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