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After a week of market chaos, culminating in the fire sale of Bear Stearns, the Federal Reserve announced today that it was cutting its key interest rate, the Federal Funds Rate, by ¾% to 2.25%, the lowest rate in 5 years.
In its statement announcing the cut, the Fed cited the continued downside risk to the economy, suggesting it might be open to cutting rates further if necessary.
The stock market responded positively, even though many experts thought the cut would be a full 1%.
This rate cut is positive for many consumers in that it will lower the rate on things like Home Equity Lines of Credit and variable rate credit cards. While you won’t see the results immediately, by the end of next month, the lower rate should have trickled through to your statement. If you’ve been thinking about refinancing your home or you’re looking to buy, now might be the time to pull the trigger.
The flip side to this rate cut is that you’ll see the rate you get on your savings and money market accounts drop and the weakening dollar will increase the cost of imported goods to increase, so expect high gas and commodity prices to stay with us for a while. |
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Money Management For Modern Life 
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