Worry about ‘myflation’ not inflation or deflation

The breathless media coverage of the Federal Reserve’s decision last month to leave a key interest rate unchanged fueled the perception among investors that when the Fed finally does raise that rate off its historic lows, the move will have a big impact on their portfolios.

Pundits predict that the Fed will raise the federal-funds rate to some degree by the end of the year, reversing the near-zero level that has been in place since the end of 2008. The federal-funds rate influences rates offered by bonds, mortgages, student and car loans and other debt. Smart people can — and do — debate the extent to which the Fed’s action will hit home for ordinary investors by spurring inflation and putting a damper on market returns.

We can’t control what the Fed does, nor can we control the ensuing market reaction. But we can take steps to insulate our financial lives from whatever the impact will be, said participants in a recent MarketWatch panel discussion on interest-rate concerns for those saving for retirement.  Read more