This has prompted the Federal Reserve to raise short term rate.

But what does this mean for you as a long term investor?

Hello and welcome to Edward Jones perspective.

I'm Sandy Miller thief.

Federal Reserve Bank, also known as the Fed, is the central bank of the United States.

Its members meet eight times a year and work to help keep the U.

S economy running smoothly.

In general, the Federal Reserve often changes interest rates, tow either spur economic growth or slow the economy down.

If unemployment is low and inflation is expected to rise above the Fed's long term objective of 2% the Fed may decide to increase rates to prevent higher inflation and the economy from overheating.

On the other hand, if unemployment is high or inflation is too low, the Fed may decide to cut interest rates to help spur stronger economic growth.

In 2017 the environment is a bit different.

We expect the Fed to continue a slow patient pace of short term rate increases, not because the economy is overheating, but in order to get rates back to a more normal levels.

Some investors believe the Fed controls all interest rates, but it's easy to be confused about which rates were talking about.

The Fed sets a target range for the short term lending rate, which is also known as the federal funds rate.

However, it typically Onley influences long term interest rates For most investors, Longer term interest rates are more important than the short term federal funds rate.

Ah, variety of factors such as the outlook for economic growth and inflation supply and demand for credit market sentiment and other factors beyond the feds control impact long term rates.

The Fed has been in the news lately because it plans to reduce its holdings of longer term government bonds.

This will be a gradual process, according to the Fed, and while it could increase long term rates, it also could be partially offset by other factors.

Keep in mind that while the Fed's actions can disrupt the market in the short term, your important financial goals likely have not changed.

Instead of predicting what the Fed will do next, make sure your portfolio is properly allocated and prepared for any additional rate increases.