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CNN Today

Fed Expected to Announce Interest Rate Hike Today

Aired May 16, 2000 - 1:03 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU WATERS, CNN ANCHOR: Well, these financial markets seem to be betting on a smaller rather than larger interest rate increase today. We'll have to wait and see how that ends up in about an hour. But it's worth pointing out that high interest rates do have an upside.

CNN financial correspondent Bill Dorman joins us now from New York.

Bill, we talk about interest rates from an investor's point of view as being a bad, bad, bad thing. But it's worth noting that some folks live off these interest rates and for them that's a good, good, good thing.

BILL DORMAN, CNN FINANCIAL CORRESPONDENT: Well, Lou, it's true. It depends on if you're the -- on the borrowing end or on the receiving end of money. If you're on the receiving end, higher interest rates are actually good, it's true. If you're on a fixed income, if you look to savings accounts, if you look at a pension fund coming in for income, that's all good news in terms of higher rates.

Interest rates basically are the cost of money: and so bear in mind when you buy bonds, for example, whether they're government bonds or whether they're corporate bonds, you're actually lending that money. So when interest rates go up, you get a higher rate of return coming back.

But in terms of the Federal Reserve, how they're looking at this, they're looking at the broad economy. And when you look at the broad economy, raising interest rates is a way to slow the economy not to speed it up. So in terms of the broad economy, we can expect a little slowdown. In terms of if you're in -- on fixed incomes, savings rates, some of those, you can look to the good side of higher interest rates if you will.

WATERS: It might be a good day to buy a CD.

DORMAN: You bet.

WATERS: Bill Dorman in New York.

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