Fed Cut Won't Translate Into Much for Consumers ... Yet

Its plans to buy more debt may unfreeze market in '09, but consumer rates stuck for now

By Jim O'Neill, Newser User

Posted Dec 17, 2008 9:53 AM CST

(Newser) – Consumers hoping for lower interest rates on credit cards, car loans, and mortgages after the Federal Reserve dropped a key interest rate to near 0% yesterday aren’t likely to get a break soon, reports MarketWatch. But loans could be easier to get once the Fed’s other actions—buying up a range of debt—take hold in the first quarter of 2009.

Experts say mortgage credit has to improve for the economy to rebound, and that’ll be a priority next year. But the struggling banking industry isn’t likely to pass along the Fed’s rate cut to consumers immediately. Home-equity rates might drop slightly, as may student-loan rates. But, one professor notes, “credit-card companies are not noted for cutting their rates when the federal funds rate falls.”

[Images (4)]

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Ford F150 trucks are loaded on car haulers outside the Dearborn Truck Assemly in Dearborn, Mich., Friday, Dec. 12. (AP Photo/Carlos Osorio)

In this Nov. 20, 2008 file photo, a sign stands outside new home for sale in southeast Denver. (AP Photo/David Zalubowski, file)

Signs for American Express, Master Card and Visa credit cards are shown on a New York store's door. (AP Photo)

Federal Reserve Chairman Ben Bernanke. (AP Photo/Jose Luis Magana, FILE)

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The Fed is stepping in as a very big actor with the explicit goal of driving down these interest rates.
- Dean Baker,
Center for Economic and Policy Research

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Fed Cut Won't Translate Into Much for Consumers ... Yet