Business

FED poises to cut rates; may take a break after that Radka Konkolova

The Federal Reserve has to decrease the interest rate again this week. FED chairman and his colleagues arrange a meeting which should start on Tuesday afternoon and take 2 day. Here they want to negotiate about another action in dedicating a new rate of interest. The have to think carefully about it because of possible threat of inflation. The key interest rate should go down by a quarter of percentage to 2% at the end of the session. I think it is quite a difficult task for the employees of FED because they have got a big responsibility to the citizens of US, to government and also to the whole world. They have to decide in the right way to make everyone satisfied.
Because the interest rate is downsizing, it is supposed that people spend more money, they can borrow money for a lower due, they can take a mortgage rather than save money on their current accounts in the bank, because there is very small profit in this case. So loans are low-cost. Also businessmen take loans to make their business better and also because it is appropriate. These days the prime lending rate could go on the figure 5%, what is in my opinion quite low level. The level of the interest rate then would be on the lowest point since late 2004.
But if there was so much loans and mortgages in the economy, a problem would happen. There would be so much money in the circulation and people would be willing to pay more for the same goods. They would earn bigger amount of money, but on the other hand the real income could be lower. Money would lost its value and everything would be more and more expensive. This is why it is very dangerous for the state economy and for the people living in that country as well. So the task of the FED is to avoid this situation, which could lead the economy to the slump. But economist think, that FED may incline to leave rates at such levels through this year and maybe also into next year.
One of the representative of FED has said, that the US economy has got negative or almost negative values of interest rate. US economy is now faltering enough. So it is very complicated to them to make the right decision. It is also because of people's worries about another growth of the prices of food and energy, which has already started.

related story: http://news.yahoo.com/s/ap/20080429/ap_on_bi_ge/fed_interest_rates;_ylt=Alf8BfBMdrV.MBUCAGIzDYmyBhIF

by Radka Konkolova for PocketNews (http://pocketnews.tv)

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edited by Tatiana Kucharikova

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posted by Blog TechSource @ 1:01 AM