Whats Next for the Fed?
Well, you’ve probably heard about the Fed slashing its key interest rate by 0.75% to historic lows, with the federal funds rate (the interest banks charge each other on overnight loans) now hovering between 0.25% and zero. The prime lending rate used to peg rates on home equity loans, certain credit cards and other consumer loans should move lower, which could help you as a consumer if you’re a borrower. However, a 30-year fixed rate mortgage is still 5.53%, a car loan more than 6%, a home equity loan more than 8% and credit interest rates more than 14%. So don’t hold your breath that you’ll actually benefit from this Fed move. It’s designed to help the banks and other large institutions, not you. Right now we seem to be seeing some deflation as consumer prices have fallen by a record 1.7% in November as energy prices retreated, while home building plunged by the most in 25 years, according to recent government reports. So it appears that the Fed is gambling that it can turn on the mon
