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Fed drops rates How will it affect consumers

Posted in Spending & Managing Money on September 27, 2019

There’s been a lot of talk about interest rates in the news lately. The president said he would like to see interest rates at zero percent or below.

On September 18, the Fed met and cut rates a by a quarter point. While it wasn’t as aggressive a cut as the president would like, another cut is another cut. During his press conference, Fed Chairman Jerome Powell announced the cut.

“Today we decided to lower interest rates…to help keep the economy strong in the face of some notable developments and to provide insurance against some ongoing risks,” he said.

Powell pointed out the economy grew at a 2½ percent pace the first half of the year supported by household spending, a strong job market, rising incomes, and consumer confidence. But business investments and exports weakened amid falling manufacturing output. This along with global uncertainty, more specifically weakness in global growth and trade policy prompted the cut.

The question now is, will we see another rate cut this year?

Powell explained that the Fed will be watching carefully all the things that affects the U.S. economy.

“If the economy weakens more, we’re prepared to be aggressive and will do so if appropriate.”

According to an article in USA Today entitled, Trump wants Feds to cut interest rates to zero or below. Here’s what it could mean for you, other countries have had zero or below rates, and it had both positive and negative impacts to the country’s economy. While there was an initial boost in the economy, the loss of bank profits caused a downshift in the likelihood of lending.

Right now Powell said the Fed is not entertaining any intention of setting negative interest rates and went on to say the effects of the lower rates as they are now should be felt over time. Lower interest rates reduce the interest burden for consumers on purchases such as houses, cars, and more, and also boosts consumer confidence.

Powell said they are looking at “continued moderate growth” with a strong labor market and staying within the target of a 2 percent inflation rate. Adjustments will be made for a favorable outlook.

“Our eyes are open and we’re watching the situation…,” he said.

Are you following the rates? Do you plan to take advantage of the lower rates? If so, how?

To see the press conference in its entirety, click here.

Are you following the rates? Do you plan to take advantage of the lower rates? If so, how?

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