Federal Government Cuts Interest Rates
August 28, 2008 · Print This Article
The US Federal Government has recently announced a large 75 basis point rate cut, which brings the total key rate to only 2.25%. In doing so, the prime rate will also fall, bringing itself down three-fourths of a percentage point, leaving it at 5.25%.
This strategic maneuver, deftly employed by the FOMC, or Federal Open Market Committe, closely trailed a .5% cut in the month of January and brought the total federal funds rate down to the lowest level established since late 2004.
This action, being the sixth consecutive cut to interest rates these past two years, was done with the goal of promoting consumer spending and borrowing in order to boost the lagging economy and recharge the financial landscape, thus improving buying power across the board.
Originally, the federal government was rumored by several economic analysts to cut rates a full percentage point, but this wasn’t the case. The federal government has spoken on this issue and said that they believed such an action would of brought on too much inflation and ended up thwarting their intentions.
Despite the moderate cut, plenty of financial leaders are optimistic about the results, saying that the cut in interest rates should be a very welcome opportunity for consumers to take advantage of low rate credit cards and even some loans, considering that there are plenty of new opportunities for some of the lowest rates out there.
Indeed, it seems that since the prime rate has fallen, interest rates everywhere should also likewise see a sharp reduction, bringing a great deal of relief to a large portion of the consumer market. It is believed that interest rates will fall approximately .75% on almost all variable rate cards.
The federal government, despite the optimism present, remains conservative on the issue and have adapted a “wait and see” approach to the matter. A government representative has said that inflation has elevated in recent history, and that some expectations for further inflation are expected to decrease as the year goes on. In doing so, this matter should reduce the cost of resources and relieve the pressure on consumers anxious about the current status and outlook of the economy.
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[...] Federal Government Cuts Interest Rates [...]
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There are two common situations which lead people to consider refinancing their mortgage. One is to save money by taking advantage of lower interest rates. The other is to manage an unwieldy debt repayment situation. If you are currently looking out to refinance your existing mortgage here are some important points you should consider very carefully.
Good explanation!
Peter Shit I mean Schiff GO FUCK YOURSELF!
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Try using Google (it gets answers a lot faster
) …
The move, aimed at keeping long-term interest rates low, is a small step to bolster the recovery, analysts say.
Concerned about a slowing of the economic recovery, the Federal Reserve decided Tuesday to resume buying U.S. Treasury bonds in an effort to hold down long-term interest rates.
Just make sure you get a fixed rate like you want, and if interest rates go down, you can re-fiinance, that's what we did when our interest rate was at almost 6%, we re-financed and got it down to 5%, and have a lot of equity on top of it. Don't ever go with an adjustable rate, they screw you every time, they always have hidden stuff, like baloon payments in the fine print, and the chances of the interest rate don't look to likely now, and they won't lower your interest unless you have good credit.
Peter I just watched your full banker speech from ’06 for the first time [i have watched smaller debates, interviews, etc from that time]. You were dead on. Not only that, but your core message has not changed and it remains true today. Keep up the good work, I support you!
Stocks fall sharply as investors' gloom grows – Yahoo! News: Stocks and interest rates fell sharply Wednesday as m…
Bond prices move inversely to interest rates. When interest rates go up, bond prices go down and when interest rates go down, bond prices go up. Remember, we’re talking about previously issued bonds trading on the open market. You can more easily understand this by looking at the following example.
A bond is issued for $10,000 for five years with a 5% coupon or interest rate, paid every six months. Then interest rates rise to 6%.
If you want to sell this bond, who would buy it when it is paying 1% below market rates (5% vs. 6%)? You have to sweeten the deal so the buyer gets a market rate for the bond.
You can’t change the interest rate on the bond. That’s fixed at 5%. You can, however change the price you will take for the bond.
The annual payment of $500 ($10,000 x 5%) must equal a 6% payment. Doing the math, you discover that the face value of the bond must be discounted to $8,333 so that the $500 fixed payment equals a 6% yield on the buyer’s investment ($8,333 x 6% = $500).
If interest rates went down instead of up, you could then sell your bond at a premium over face value because the fixed interest rate would be higher than the market rate.
Bank Money >>> Mortgage rates at 50year lows. Should you refinance? Maybe not. Recordlow mortgage rates make refinancing look tempting < << >>>
You make a good point. However, the interest rate cut affects the exchange rate well before the cut actually takes place. Investors estimate how many points the interest rate will be cut and the exchange rate adjusts accordingly. On the day of the cut, if the interest rate is cut more than expected, then the value will fall and vice versa. Then immediately after the adjustment, the exchange rate once again forecasts the future.
The rate that is adjusted by the central bank, such as the Federal Reserve, is the rate used in the transfer of money between commercial banks and that central bank. When it is adjusted, commercial banks will adjust their rates accordingly. For example, a commercial bank may lend funds at 5% over the prime rate (rate set by the central bank). If the central bank raises the prime rate from lets say 2.5% to 3%, then the commercial bank would raise its interest rate from 7.5% to 8% so that they still get the same percentage of interest on money lended to its customers. Thats how banks make profits, from fees and interest.
Thanks, I think it would be interesting to add the spot price of silver to that chart.
Clearly, no self-respecting economists honestly believe that a monopoly is good for consumers (in terms of the price and quality of it’s goods/services), and yet, most main stream economists support the Fed and it’s monopoly on the production of currency. Nobody supports monopolies for economic reasons. Everybody knows that monopolies suck.
Inflation is the greatest hidden tax ever devised by the private, for profit Federal Reserve international banking cartel because our money is not backed by anything. This video is very dated, already.
Nice work. keep it up. mean time come for social media marketing for esteembpo**com
It stands to reason that when you invest your money you want to make sure that you get a good return. Whether you are looking at risky investments or putting your money in a savings account will more than likely affect the return amount of your money. In some scenarios investing your money can be a great way to make money, sometimes in a short amount of time. However that said it is a big risk and you should be aware that you could lose money as well as making it. If you do decide to go down this route make sure you go via a professional broker so that they can give you advice. Ideally though what you should look at is putting your money into savings account with high rate interest offered. These offer a better return than “standard” s … Guaranteed High Interest Rates
US credit card interest rates climb to 14.7pc -
There is a conection between the two. When the BOE increases the rate this increases the rate that the retail banks have to pay back to the BOE. The retail banks naturally pass this on to their customers.
Traditionally, bond prices rise when interest rates fall. Creditworthiness is another matter – I would not invest in junk bonds right now.
Article by at 2010-08-28 09:36:14
Categorized in Savings Account,
They generally move in the same direction.
I had a part B but it never showed up lol Oh well.