Fed Cuts Rates Again - What to Expect
Here’s what to expect after another BIG RATE CUT…
In an 8 to 2 vote, the Federal Reserve lowered short-term interest rates by a hefty 3 / 4 of a percentage point yesterday - to 2.25% -
in an attempt to offset the ongoing credit and financial crisis. Following the Fed’s announcement, banks cut their prime rate, the base rate for loans and credit cards, from 6.00% to 5.25%. Over the next month or so, consumers with variable rate credit cards and good to excellent credit will likely see a reduction as well.
The Fed’s move matched the most aggressive single move for the U.S. central bank since it began targeting the fed funds rate in 1990. The lowest rate in more than three years and the sixth cut since September 2007, the Fed suggested that the economic outlook may require even more rate cuts in the future. “I suspect they will still cut again,” says Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida.
It usually takes at least a month for the Fed moves to show up on your credit card statement. Since credit card issuers use different formulas to determine when to adjust rates, the changes will vary. Many issuers use the prime rate that’s in place two business days before a billing cycle ends. This means if your billing cycle ended on March 19th, the day after the Fed lowered rates, you will still be charged the higher rate until the following billing cycle. Since the Fed began it’s round of rate cuts last September, variable rates have been slowly inching downward, while fixed rates have mostly held steady.
* Be sure to see our complete list of low interest credit cards >
May 1st, 2008 at 8:06 am
[…] decision follows a half point cut six weeks ago to help offset the nation-wide erosion in the real estate market and new home construction that is […]