Fed Rate Cuts Made Simpler
FOX News
Friday, October 26, 2001
Gail Buckner, CFP
This week, Gail explains how the Federal Reserve's much-publicized rate reductions affect our everyday financial lives.
Gail,
Could you please explain how when the Fed lowers the interest rate it affects other rates (mortgage, auto, CDs etc).
The reason I ask is for the past few months, I've been watching the mortgage rates and when the "Fed" initially lowered its rates, the mortgage rates came down. But mortgage rates seem to have hit a plateau. They haven't continued to come down even though the Fed kept lowering its rates.
Thank you,
Brent
Dear Brent,
Great questions! The Federal Reserve ("the Fed") doesn't have the power to order banks or credit card companies to charge a specific interest rate. That's why a lot of companies — department stores, in particular — are still gouging us to the tune of 18-21% on outstanding credit card balances.
They get away with it because consumers put up with it. It's a free market, so if you don't like their terms you can simply stop using their charge cards and switch to one offered by another, less expensive, credit card provider.
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