The Federal Reserve's decisive statement this week that interest rates are unlikely to rise this year sends a signal to U.S. households: keep ...
WASHINGTON: The Federal Reserve's decisive statement this week that interest rates are unlikely to rise this year sends a signal to U.S. households: keep buying stuff.
The Fed tries to guide the U.S. economy by controlling the interest rate banks charge one another for overnight loans. Moving this rate up lifts other rates in the economy, making it costlier for people to use their credit cards or to buy homes and cars. Higher rates also make companies rethink investments.A solid majority of Fed policymakers on Wednesday said higher rates are unlikely this year, leading investors to bet the economy might slowing enough for the Fed to actually cut rates.
Rising stock prices comprise the flip side of lower bond yields. That boosts the value of private retirement accounts, such as 401s, particularly those of young people whose accounts tend to be weighted toward stocks. The benchmark S&P 500 stock index surged after the Fed's decision, reflecting the view that cheaper borrowing costs would help company profits. It is possible that stock market gains could boost consumer spending because people sometimes loosen their purse strings after a rise in perceived wealth.The U.S. jobless rate is near its lowest level in 50 years although lately there have been signs of softening in the labor market.
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