Wednesday, January 30, 2008
Fed has cut the rate..............and it means?
The Fed cut interest rates today, 30th January, from 3.50% to 3.00%. The interest rate is the rate at which banks lends to other banks for a period of time, usually overnight. The Fed did that to prevent the thought of recession. The Fed has to respond to the falling stock market and failing economy. The effects of the reduced interest can be categorized as good news, mixed news and bad news.
This will help people to borrow loans at a cheaper rate. This enables people to take loans for businesses or cars, that are within their reach i.e. loans they can afford the monthly payments.
People with variable rate mortgages loans can refinance their homes. Also if you have a variable rate credit card, you can call your credit card to lower your rate if your rate can be lowered.
Treasury bonds, already taken students loans and fixed mortgages will not feel the effect right away, but they will feel it in the long run.
Savers and high yield interest rate account owners will have lower returns on their money. People with existing car loans will not benefit from this reduced interest rate.