I usually don’t write about economic issues beyond my household budget, but I think this warrants mentioning. The Federal Reserve has announced that they’re cutting the federal funds rate by a quarter point, down to 2 percent — the lowest it has been since 2004. This marks the seventh rate cut since September 2007, but experts believe that the size of this latest cut shows that Federal Reserve chair Ben Bernanke isn’t likely to continue his policy of slashing rates.
After the Federal Reserve announcement was made public, banks wasted no time in cutting the prime lending rate to 5 percent. This means consumers and businesses will have cheaper credit at their disposal, which could help ease some of the problems caused by the housing crisis and general cash shortages.
In all honesty, I have no idea how the Fed’s rate cuts will affect me. I don’t have any loans tied to the prime rate, and I don’t really have any investments to speak of. Will this rate cut impact prices at, say, the grocery store? Again, no idea. Maybe I should have paid more attention in Econ 101!