If you’re a borrower, this is great new for you! The Federal Reserve is expected to drop interest rates for the second time this year later on today. This cut could be as much as 2%, according to policymakers. Many investors are cheering this move, which might go a long way in helping the economy and our own personal finances.
Most of us pay interest rates on a lot of the things we buy. From cars to credit cards and other things we purchase with credit, how much we pay each month is determined by the interest rates. When the interest rates go up, consumers pay more money for their loans. And, obviously, when the rates are cut, it can save consumers thousands of dollars each year.
It’s not all good news, though. Curt Long, an economist with the National Association of Federally Insured Credit Unions says it’s not a great move for people who save money.
“It kind of depends on which side of the fence they’re on,” he said. “If you’re potentially going to be a borrower in the near future, the fact that the Fed seems determined to be patient, in their words, is probably good news. It means rates will probably stay lower than they would have otherwise. On the other hand, if you’re a saver, that might not be as good of news for you.”
Making Up for It
By lowering the interest rate, the banks sort of lose money on the interest they would’ve collected. Just like with any other economic sector, they then pass that cost on to consumers. Others, like the managing director of Bel Air Investment Advisors says that a 2% interest cut really won’t be felt by too many people.
Still, right now is the perfect time to start getting rid of your bed. “Interest rates at some point will go higher, and it’s important to reduce in good times so as to not feel overburdened in leaner economic times,” he said.
Interest rates are often lowered when the Fed wants people out there spending more money. President Trump has been calling Fed boss Jerome Powell an “enemy of the people” as he pushes for the Fed to drop rates. As the trade war increases costs for consumers, lowering interest rates can be a good way to counter that and encourage spending.
The trade war continues to offer many uncertainties, along with a possible no vote with the Brexit deal. The global economy is also facing a recession and many countries are feeling the hurt. The U.S. is still going strong with job numbers looking encouraging.
