Yielding Wealth | Personal Finance

Why I’m Not Excited About Today’s Interest Rate Cut

by miranda on April 30th, 2008

The Federal Reserve is expected to make another interest rate cut today. And I can’t say that I’m overly enthusiastic about it. The announcement is supposed to come at 2:15 eastern, so that’s still three hours away. I have all sorts of time to consider.

My main issue is inflation right now. Food prices inflation and gas prices are issues in terms of household budget. And other inflation could rise as well. That’s what happens when interest rate cuts like this are made.

Stocks

On the plus side, stocks are up in anticipation of seeing the benchmark rate at a low 2%. So that means my  investment portfolio will get a boost. Unfortunately, I’m a long-term investor, so the little blips that this sort of thing promotes doesn’t really benefit me all that much.

Cash

This is a real bummer for me. Until last fall, I was enjoying a 5.5% return on my savings account. Now it’s not even close. I don’t have a ton of cash investments, but I do have them to limit risk to my investment portfolio. And I use them to build my emergency fund. Which won’t be growing as fast.

The good news for those with credit card debt, though, is that this will drop those rates a bit. Now is a great time to get out of debt, since more of your payment will go toward the principal and less toward interest charges.

Are you excited about the interest rate cut?

image credit: sxc.hu

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