What affect does dropping the interest 0.5% to the average consumer?

Question

I work a full time job. I pay 9% of my income into a 403B. I have 3 credit cards. I am getting ready to pay off my car. I have about 2K in I bonds, and a whole lot more in my retirement savings. My home is paid for. I would like to get a loan to make some repairs and get some siding and a new roof.
I watched the news when the feds dropped the intrest rated a whole 1/2 % and everyone was oohing and aahing over it. I just dont get what that means to me. Can you please tell me what it means to an average jo here in america?

Answer 1

By raising or lowering the interest rate, the Federal Reserve attempts to affect the nationwide demand for goods and services by both companies and individuals. (When they lower it, they are trying to help the nation out of a slump or recession---lowering it usually increases demand for goods and services and raising it has the opposite effect.)

Changes in real interest rates affect the public's demand for goods and services mainly by altering borrowing costs, the availability of bank loans, the wealth of households, and foreign exchange rates.

Lower interest rates also tend to increase stock prices. People who own stocks thus find that the value of their holdings has gone up, and this increase in wealth makes them willing to spend more. Higher stock prices also make it more attractive for businesses to invest in plant and equipment by issuing stock.

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What this means to you?

You'll probably find it easier to get a loan for your home repairs, and you'll get a better rate. You can also try negotiating with your credit card companies to get a better rate on your cards...They'll be more willing to since the Fed has dropped the interest rate.

Your retirement fund should show a better return this year than last year.

Answer 2

In a nutshell, lower fed rates mean easier credit lines, cheaper debt, and a greater willingness to lend money to consumers. On the negative side, the dollar's value decreases due to inflation, so prices nominally increase over the long term.

So for your credit cards, the interest should be cheaper, but your principle should be greater (meaning you'll end up paying MORE because you're being charged less interest on a notably greater amount of money). Car financing should be easy, but you'll still end up paying more due to the car's increased price. Your current bonds will appreciate since their interest rates are greater than the current ones at hand (bonds purchased now are worth less than the ones you currently have).

Additionally, if you really want to protect your retirement funds, I suggest exchanging into foreign currencies especially the Pound Sterling. The Dollar is expected to continue to depreciate for some time now, so moving your accounts into a more stable currency will help you out.

Answer 3

The cuts will enable human beings to borrow additional money and spend it. I agree that this might income the wealthy in a greater dramatic way as those are the folk who're going to borrow greater to speculate in new homes and so on.. I disagree that it might haven't any result from now on because of severe debt to benefit ratio and that we at the instant are not headed in direction of a eastern deflation. the yank distant places money is a benchmark (all be it at the instant falling in fee) distant places money international. distant places investment might strengthen because of the falling greenback and the falling interest value. this would possibly not enable use to circulate into right into a deflationary era. it is how the yank and eastern financial equipment fluctuate. In Japan, they became a loss of call for for distant places investment.