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Nationwide Comments on Fed’s Decision to Raise Interest Rates

December 17, 2015

Columbus, OH - As widely expected, the Federal Reserve announced today that it was tightening monetary policy by raising the target federal fund rate by 25 basis points. The Fed also signaled that any future tightening would initially be gradual and data-dependent.

David Berson, senior vice president and chief economist for Nationwide, said the near-term effect should be minimal.

“Because this tightening was so small and well-telegraphed to financial markets, the impact of this single move should be negligible on both financial markets and the real economy,” said Berson.

Berson noted that other short-term interest rates should move up in concert with the federal funds rate, which will have little impact on fixed-rate mortgage rates and only a slightly larger impact on shorter-term adjustable rate financing, such as on auto loans, credit card rates or adjustable-rate mortgages.

“We expect little impact on home sales and light vehicle sales as a result, and there should be some positive, albeit small, impact on the interest rates that consumers get on their savings,” said Berson.

Mike Spangler, president of Nationwide Funds, stated that he believes investors have become overly fixated on the immediate-term perceptions of an anticipated Fed funds rate increase.

"An expected modest increase is interest rates from the historical lows reflect a more stable economy that is able to start the process to move to a ‘new-normal’ with less stimulus," said Spangler. “Investors should always maintain diversification in their portfolios, both within their hedging and fixed-income allocations as well as broader asset classes to potentially provide solid returns, while dampening volatility.”

“We recommend investors stay calm and maintain a long-term, asset allocation driven investment approach,” said Spangler.

About Nationwide

Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by both A.M. Best and Standard & Poor’s. The company provides a full range of insurance and financial services, including auto, commercial, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; banking and mortgages; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com.


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