According to a projection by Goldman Sachs, the Fed rate could rise twice as much as the street expects in 2016. The Fed controls just two rates –The Federal Funds Rate & The Discount Rate. The Federal Funds Rate, also known as the Overnight Rate, is the rate at which banks lend their money deposited at the Federal Reserve to each other. The Federal Discount Rate is the rate at which banks can borrow directly from the Federal Reserve. But those rates drive virtually everything else. There is another rate, The Prime Rate that is not set by the Fed. This rate is imposed by individual banks for many types of loans, including loans to small businesses and credit card loans.
Expected and already baked into the cake is a raise of sort-term Fed Funds in December, the first increase in about 10-years. However, bond-market futures suggest rates will only rise an additional 50 basis points (0.25%) in 2016.
Goldman's top economists believe that a tight labor market, consumer spending, and stronger home sales will be the likely driving force.
Recent news though shows housing is again depressed. Additionally, how could we have a tight labor market with the US Government importing 100,000 immigrants annually plus those sneaking across the southern border? And of course now we have the ongoing debate over allowing tens of thousands of war torn refugees to enter in spite of many States governors objecting. In my opinion, a better plan would be to provide for them in a safe-zone near their home country so they can someday return.