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21 <br /> income and consumption. As a result of the Fed's tightening of interest rates, short-term rates <br /> will certainly move higher. Long-term rates will also move up due to higher expected future <br /> inflation rates and the view the Fed will push interest rates higher over a multi-year period. <br /> The biggest change in the Business environment will be an increase in the rate of housing <br /> starts and a moderation in the rate of housing price increases. The stock market will gain—but <br /> only slightly—and the dollar will continue strengthening. The latter will present challenges for <br /> the manufacturing sector and keep the GDP growth rate from being even higher than 2.4%. <br /> With the Fed's interest rate moves, Households will see higher borrowing costs in 2016. <br /> This will cause the relative size of household debt payments to increase and the savings rate to <br /> fall. But more limited household borrowing will mean only a small increase in the relative size <br /> of household debt. An acceleration in household formation will boost GDP growth. <br /> For Fiscal Policy, faster economic growth producing larger federal tax revenues will keep <br /> lids on the relative sizes of both the budget deficit and national debt. However, higher interest <br /> rates will mean a rise in the relative size of federal interest payments. If the Fed continues <br /> raising interest rates beyond 2016, the impacts on financing the national debt will become a <br /> prominent issue. <br /> The Fed is now on an announced track to be less stimulative in Monetary Policy. The <br /> federal funds rate will jump to 1.00%by the end of 2016. Money supply growth will moderate <br /> and excess reserves will slightly contract. A faster paced economy with higher interest rates <br /> will accelerate money velocity. <br /> 8 <br />