Why does the Fed keep lowering rates?
We have seen the Fed cut interest rates to help stimulate
the economy. By lowering the cost of borrowing people will take on more debt
and increase their spending. However, the real winner may be businesses as
their cost of borrowing will go down and they can invest into new equipment or
expanding with much lower cost of managing their debt.
What could be the trouble with such low rates? Well if rate
stay low people may take on too much debt or be tempted to spend too much. This
will cause inflation as people outbid each other in the quest to acquire new
goods or services. The Fed has a benchmark they would like to keep inflation
at. That mark is 2% because above that prices are rising to quickly and below
that we are stagnate in our economic growth.
If you need to get a high rate on a CD or other fixed investment please reach out to our office for a rate quote.