Mar 18, 2008 10:02 pm US/Central
Making Sense Of The Fed's Latest Interest Rate Cut
CHICAGO (CBS) ―
Tuesday was a good day for stocks, bolstered in part by the latest interest rate cut by the Federal Reserve. The Fed lowered its short term interest by three-quarters of a percent in order to restore confidence in the U.S. economy.
CBS 2's Mai Martinez reports the rate is now 2.25 percent. Those who study the markets say it could be the break consumers have been looking for.
"It kind of liquefies away, or inflates away a lot of the debt that's been taken on over the last few years," said Justin Fuller, a Morningstar equities strategist.
But not everyone will benefit from the rate cut. Those who are struggling with risky or bad credit histories will likely not find any relief. Those with good credit, however, could find themselves in a very comfortable position.
"If you're in a high-interest mortgage, it could offer you in a month or so, it could offer you a time to refinance that mortgage," Fuller said. "If you have a lot of debt, in terms of credit cards, or student loans or whatnot, you can potentially consolidate that debt into a lower rate."
Many consumers say it's about time they catch a break.
But analysts say, the rate cut is not all good news.
"Certainly the dollar is going to be under pressure, continued with lower rates, as greenbacks will be worth less," Fuller added.
It's also bad news for those who keep their money in money market accounts or savings accounts because the return on their investment won't be as great.
"The Fed is basically encouraging you to go out and buy things or put your money into new investments," Fuller said.
But Fuller adds, because everyone's situation is different it's best to talk to an expert before making any long term changes to your financial portfolio.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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