Title 1
Posted 03/30/09
When the Federal Reserve announced the decision to lower key bank interest rates, the previous rate of 1.5 percent was cut to a very low 1 percent. This generous rate cut is meant to encourage new borrowing and spending by consumers in order to bolster America's economy. According to the Federal Reserve, this rate cut (together with other measures taken by both the Federal Reserve and Treasury) will, with time, encourage economic growth and improve credit conditions. The Federal Reserve also stated that, if the situation dictates, it may lower interest rates even further in the future.While a rate cut was widely anticipated, there was much speculation as to the size of the cut. Already this year, the Federal Reserve has made several rate cuts. Among this year's rate cuts is a half a point cut that took financial analysts by surprise a little less than a month ago. The interest rate of 1 percent is equal to the rates in place at the end of 2003 and the beginning of 2004. This compares starkly with the rates of late 2006 and early 2007, when the interest rate was as high as 5.25 percent.
For those looking to take out home loans, this new rate cut is a very positive development. While the Federal Reserve is not directly responsible for setting rates for things like loans or credit cards, this rate cut should have a significant effect on interest rates across the board. Rates in general (and home loan interest rates in particular) rise and fall along with the rates set by the Federal Reserve. Those with debts in home equity credit, variable-rate credit cards, variable-rate mortgages (or other types of mortgages) are in a position to benefit greatly by this rate cut.
The Federal Reserve's recent rate cut is positive for consumers at almost all levels. It does, however, have a downside when it comes to savings and checking account interest rates, as well as rates for certificates of deposit. These rates may lower or remain low as a result of Federal rate cuts. For those with money in these sorts of accounts, it's a good idea to spend some extra time shopping for the best rates and lowest fees.