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Federal Reserve slashes interest rates to zero

washingtonpost.com

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Re: Federal Reserve slashes interest rates to zero

#11

Post by thebeardisred »

bluedevil2k wrote: post #4
majos wrote: post #2

Dumb question: does this mean normal citizens can take out loans at near-0% interest, or something close to that? I know credit card interest rates are typically tied to “the fed rate” but a but higher?

The Fed rate is the interest rates that the Fed pays banks for their deposits in the Fed. By lowering it, they’re incentivizing the banks to loan the money and provide liquidity into the market. Since banks need to make a profit on everything, they’ll loan the money out at a higher rate for things like mortgage, car loans, and credit cards. Depending on the credit worthiness and the collateral, the rates will differ…

You'll never get zero on _some_ products. Retailers utilize low interest rates to provide "direct" financing to incentivize purchases at their stores. This is often provided as a "promotional"[1][2] rate with the hope that it will spur purchasing in the short term and then make money on the financing in a longer timeline. Often this is done at stores which sell "durable goods" (e.g. appliances or automobiles). The takeaway? You can absolutely get 0% as a consumer, as always though there is fine print.

[1]: https://www.mymoneyblog.com/be_careful_of_0.html [2]: https://www.edmunds.com/car-loan/what-you-need-to-know-about...

Re: Federal Reserve slashes interest rates to zero

#12

Post by dcftoapv »

This is not going to help

- It takes two years for monetary supply changes to fully propagate through the economy

- Cutting rates to 0% has not been effective in Japan or Europe

The fed does have a role to play here

- They can provide liquidity to the market

- They can serve as a backstop in a time of crisis

DC needs to get their shit together

- Eliminating Trump's tariffs would do more to increase long-term investment than cutting rates to 0%

- They should have created targeted lending program to help businesses that need short-term cash flow assistance yesterday; the next best time to do it is right f*ing now

Re: Federal Reserve slashes interest rates to zero

#13

Post by jaggederest »

xxpor wrote: post #7
bluedevil2k wrote: post #4

Earlier quoted context omitted.

The Fed rate is the interest rates that the Fed pays banks for their deposits in the Fed. By lowering it, they’re incentivizing the banks to loan the money and provide liquidity into the market. Since banks need to make a profit on everything, they’ll loan the money out at a higher rate for things like mortgage, car loans, and credit cards. Depending on the credit worthiness and the collateral, the rates will differ…

>but you’ll never get to 0% as a consumer. Unless we see negative fed rates. Not that I think going so negative we see consumer level 0% mortgages is likely.

Ironically, much of the tax advantage of owning vs renting is embodied in the mortgage interest tax deduction. If there were no interest, obviously it would be a good deal, but would not have the additional benefit of tax avoidance that it does at present.

Re: Federal Reserve slashes interest rates to zero

#14

Post by jkraker »

colinbartlett wrote: post #8

My "high interest" savings accounts already took a recent haircut and this will accelerate that. I understand that's the idea: make investing attractive and savings unattractive. But for a regular joe like me, this is exactly the time I want to be saving more so it stings.

I moved some of my high yield savings account into a 12 month CD recently to maintain a more tolerable interest rate for the next 12 months while the savings account interest rate inevitably tanks. That means I can't touch it for 12 months if I want the interest, but I was careful with the amount I put in the CD so that I will most likely not have to touch it.

This should in no way be construed to be advice because I'm unqualified to give it. It's just an option.

Re: Federal Reserve slashes interest rates to zero

#15

Post by aazaa »

The Fed can, and will do much, much more. The signal here should be read as "whatever it takes to avoid a depression."

Among other steps, this is likely to mean:

- Negative-yielding long-term treasuries

- Direct purchase of stocks or ETFs, which would require congressional approval. Expect the discussions to start soon.

The steps already taken and the ones to be taken will create financial manipulation on a scale never before seen.

If the Fed loses this fight, game over.

Re: Federal Reserve slashes interest rates to zero

#17

Post by jgalt212 »

aazaa wrote: post #15

The Fed can, and will do much, much more. The signal here should be read as "whatever it takes to avoid a depression." Among other steps, this is likely to mean: - Negative-yielding long-term treasuries - Direct purchase of stocks or ETFs, which would require congressional approval. Expect the discussions to start soon. The steps already taken and the ones to be taken will create financial manipulation on a scale nev…

> If the Fed loses this fight, game over.

Only in the sense that the fate of the world rests in inflated asset prices. That's not to say actions of the Fed cannot stabilize the markets, which is very important. But if the world is scared and scared for a long time (demand shock), there's not much the Fed can do. Then it will come down to whether or not the USG can become the "consumer of last resort" via fiscal stimulus.

Re: Federal Reserve slashes interest rates to zero

#19

Post by apta »

myoon wrote: post #6
majos wrote: post #2

Dumb question: does this mean normal citizens can take out loans at near-0% interest, or something close to that? I know credit card interest rates are typically tied to “the fed rate” but a but higher?

No, this is the fed fund rate, which is just for banks to borrow really short term (overnight usually) to each other. Most consumer loans are based on the prime rate, which has a few points added to the fund rate to cover the cost of borrowing.

Would someone be able to negotiate a 0% loan with a bank you think?

Re: Federal Reserve slashes interest rates to zero

#20

Post by onlyrealcuzzo »

daddypro wrote: post #18

Does this interest rate transfer to lower mortgage rates? Is now a good time to refinance loans?

No. This is a rate for banks only. You get the rate banks pass on to consumers, which is obviously higher, because they need to make money.
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