The Dow finished higher today by triple digits, this ahead of the conclusion of the last two-day FOMC meetings for 2015. Much of this is positioning ahead of a Fed announcement but most investors as well as bond-holders have priced in a 0.25% FedFunds rate hike. Anything more than that and it could spook the markets and anything less would likely pare back Wall Street’s gains over the past few days. Still, the Dow is well below the 18000 mark hit last summer. So what is the big deal this time around for the Fed?

The biggest might not be the cost of funds in and of itself, which matters, but that the Fed is finally making  a move after more than eight years. That’s a long time without a rate increase by the Fed Committee but in reality, what will this impact? Essentially, with the Fed Funds rate currently at 0.25% and with the consumer inflation rate hovering around a 0.20% monthly gain, rates are effectively at zero. That said, if rates go from 0.0% to 0.25%, what will happen? Not very much, at least from this viewpoint. The only ones that will really jump up and down will be those who rely on savings and investments for retirement income who have seen their capital produce very little over the past 10 years and an increase in rates, albeit a small one, is a start.

Historically, a rate increase would eventually cause a pullback in stocks as the cost of funds moves higher and businesses borrow less but the unprecedented effective rate of zero for so long really leaves much to the imagination. If it costs banks 0.25% to shore up their reserves, does that put a damper on lending? Not so much if the past few years are any indication as banks looked at risk more than the cost of funds and it was more difficult to obtain financing from a couple buying their first home to a major corporation looking at expansion capital. In the best of worlds, the Fed will raise rates tomorrow by the expected 0.25% while everyone else simply yawns.