What the Fed’s rate cut means for you: not much
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A day late, but it’s worth splashing the cold water of reality on stories telling you the Fed’s latest rate cut will make your life better somehow.
The Federal Reserve is trying to breathe life into the economy. It is trying to make more credit available at lower rates. It is trying hard.It is not succeeding.
The interest rate story is not that Ben Bernanke (pictured) is trying. The story is credit is tight and expensive. San Francisco Fed President Janet Yellen, via Calculated Risk:
Consumer credit is costlier and harder to get: loan rates are up, loan terms are tougher, and increasing numbers of borrowers are being turned away entirely. This explains, in part, the exceptional weakness we have seen in auto sales.
Credit card interest rates are rising, not falling. This is from the Associated Press:
In coming weeks, for instance, American Express is instituting a broad-based interest rate hike of 2 to 3 percentage points on card holders. The hikes are the result of an expected rise in charge-offs, or balances written off as not being paid, the company said earlier this month.
I’m not saying the Fed isn’t trying hard enough. Bernanke is pulling out all the stops. What I’m saying is the story that matters most is not today’s effort. It is not today’s hope. It is today’s reality.
-- Peter Viles
Thoughts? Comments? E-mail story tips to Peter Viles.
Photo: Bloomberg News