The US Federal Reserve has cut rates to near zero and is providing significant liquidity to banks. These are drastic actions from the Fed not seen since 2008. Many consumers may not understand exactly how this effects them and what the results of these actions will be. Jonnelle Marte and Heather Timmons of Reuters recently wrote an article breaking down how the Fed’s actions will affect the US Consumer. The first thing the article points out is that companies will have expanded access to loans; this will allow companies who need cash in the short term to continue to make payroll and pay suppliers. This will help minimize layoffs and keep cash flowing into the pockets of consumers. The second thing the article points out is that mortgage rates, which were already low, have moved even lower. This should allow nearly all consumers the ability to refinance their mortgages at a lower rate, making monthly payments less onerous. The lower interest rates will not just apply to mortgages but also commercial loans, which will help to ease the burden of existing debts on businesses. Lastly, while the natural reaction of consumers will be to save money, savings accounts will be paying near zero interest rates. This encourages consumers to either continue to spend money or buy securities like stocks and bonds that will earn a higher rate of return over time, both of which help support the economy.
Read the Full Article Here: https://www.reuters.com/article/us-health-coronavirus-central-banks-fed/what-do-the-feds-latest-moves-mean-for-us-consumers-idUSKBN21302U
