Federal Reserve Board Chairman Ben Bernanke is optimistic about an improving U.S. economy.
He said the Fed will take a go-slow approach by continuing the stimulus, including the purchase of $85 billion worth of bonds each month. As the economy continues to improve, the stimulus efforts will be scaled back.
"We would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year," Bernake said.
While unemployment remains high, currently at 7.6 percent, Bernanke and other economists believe the rate could drop to as low as 6.5 percent sometime next year.
New home construction and sales have boosted the economy.
"The housing sector, which has been a drag on growth since the crisis, is now obviously a support to growth," Bernanke said. "It's not only creating construction jobs, but as house prices rise, [there's] increased household wealth."
Higher interest rates will have an impact on consumers, making it more costly to buy cars and homes.
Mortgage rates already have risen half a percentage point since May and are now above 4 percent. They haven't been this high in more than a year.
Sarah and David Turnbull are prospective first-time home buyers in Nubury Park, Calif. They want to get in before the rates go higher.
"People are really thinking that makes a big difference in my monthly payment and in what I can afford," California real estate agent Susan MacLean said.
That's because every 1 percent increase in home mortgage rates makes owning a home 10 percent more costly. That means a 1 percent increase would increase the monthly payment on a $500,000 home by nearly $240.
As for car loans, higher interest rates mean it will cost the Turnbull family an additional $200 annually to replace their current vehicle.
The upside is Americans will earn higher interest on their savings accounts and certificates of deposit (CDs).