Interest Rates and How They Affect You

Interest rates are something often looked forward to in the market. Will the Fed raise rates or pause? Will they surprise and lower? Right now the discount rate is at an astonishing low of 0 - .25%. Low interest rates make it easier for banks to borrow money and lend to consumers. This also tends to spur on inflation. Lucky for us right now, inflation is too low to be worried about. However, if inflation suddenly rose, interest rates might also have to be raised to counter it. Since interest rates stimulate lending, people can buy more goods thus increasing demand. When demand increases, unemployment lowers and GDP increases. This is all cyclical. Right now we are experiencing a reverse effect of this trend.

What does low interest rates mean for us right now? Low interest rates means that it is easier for us to get loans from a bank at a lower rate. Mortgage rates and credit card rates are tied to these interest rates in terms of borrowing. Of course the rate you get is also tied to how risky you may be in terms of credit history and such. Low interest rates also means that you are getting less interest in money market funds and savings accounts. The stock market usually performs well with lower rates. You should probably try to focus on getting your credit card rates adjusted a few notches and maybe even try to refinance that mortgage or car loan before rates go back up. There is always something to take advantage of, you just have to find it.