How will the Fed decision affect you?

Unless you have been asleep for the last five hours you would know that the US Federal Government has cut the fed funds rate, and this rate effects the variable interest rates like home equity lines of credit and credit cards. The gist behind the Fed cut is to boost the economic growth, doing this by encouraging banks to lend more freely and making it cheaper for businesses to borrow money and expand their business.

The Feds move is to make it easier for banks to access credit this is done by lowering the interest rate they are charged when borrowing from each other. Although the consumer may not see an instant change, you should reap the benefits a little down the line, maybe by seeing lower rates for Short-term savers, those certificate of deposit (CD) rates should probably stay low, and borrowers with adjustable rate mortgages (ARMS) could see their rates lowered.

The Feds rate cut is potentially good for consumers. Although we can only try to look into the financial future (if we could then we would all be billionaires) we must keep in mind that as we are already at 1 percent interest rate, and there really isn’t that much left to cut, plus with market observers fearing we could follow in Japans footsteps with extremely low rates and still have a sinking economy, we can only wait and see what is round the financial corner.

However, the US has moved much faster in bring solutions to the ailing economy than Japan did earlier this decade, although the US have used tax-payer’s money to do it. They have also expanded the balance sheet, thus allowing it to pump more money into the financial institutions. It can be a case of if, what and maybe’s in the gloomy economy, but we follow these wise words just spend, save and invest wisely and above all stay focused and happy.

What do you think of the Feds cutting the rate? What impact do you think it will have on your life?