Federal Reserve changes interest rates and consumer

Of all the ways the Fed controls the money supply

, the majority of the public on possible changes in interest rates.

http://www.moneyrates.equitylinesite.com/2009/11/25/federal-reserve-changes-interest-rates-and-consumer/

Hearing before the planned meeting of the Federal Reserve, is much speculation about what the Fed This speculation on the stock exchange. Reports in the media to speculate on the consequences of these changes in consumer credit cards, mortgages and auto loans.

All the media attention and speculation is a bit 'misleadingsince any change in interest rates the Fed does not directly affect consumers. The rate of interest, as the discount rate, does not refer to your credit card interest. Refers to the percentage of banks of the Federal Reserve, charged when banks lend money.

The Fed changes the rate is more or less profitable for commercial banks to borrow money. The banks use the money borrowed to make loans to their customers.

TheseKey points to consider:

1. The objective of the Federal Reserve to control the amount of money in the system.

2. The objective of the commercial banks to earn money. Make money from the loan to the borrower.

If the Fed the amount that banks pay to borrow money, is on the rise, banks can make more profit on their loans to their customers. When the Fed lowers the number ofCommercial banks can make more profit from their loans to bank customers.

When the Fed changes the money they ask for the banks, which affects the velocity of money in the economy. The higher interest costs, banks can increase lending more money faster and the amount of money in the system. Additional costs may slow the banks lend money. Although the proportion of direct interest to the banks, these changes in rate for all of us.

Thethe critical point is that consumer interest is not directly linked to changes in interest rates by the Federal Reserve in context. The Fed does not change the rates of consumption. Banks may change their rates on credit cards or adjustable mortgage, but not directly to the change in the rate the Fed charges banks to borrow money, they are related.

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Federal Reserve changes interest rates and consumer

By: kadinblog

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