The Story
Tomorrow, the Federal Reserve is expected to bring interest rates down.
Well isn't that fun.
It is for the stock market. If you were wondering what the money doctors at the Fed do, they take the US's economic temperature and prescribe interest rates. The goal is to keep the economy growing nice and steady – not too fast, not too slow.
Which means (just for those in the back)…
If the US economy is looking good (think: low unemployment, strong GDP), the Fed often decides it can handle higher rates. But if the economy isn't looking too hot, the Fed gives it a boost with lower rates. That helps encourage people to spend money and companies to invest in those big ideas bosses keep talking about.
So tomorrow's decision...
Means that Fed Chair Jerome Powell thinks the US economy could use an assist. That's because of things like trade tensions and a global economic slowdown, which could lower demand for US-made products abroad.
Wait, I thought people have been saying the economy was doing well?
Well, US unemployment is close to a 50-year low. This would be the first time the Fed is lowering interest rates since the 2008 financial crisis. There isn't consistent messaging from Fed officials on why they'd lower rates, but it appears to be to try to keep the good (economy) times rolling.
What are people saying?
Some say the move will help the stock market, not the actual economy. Others say this could help protect the economy from an economic downturn. President Trump has repeatedly made it clear he wants lower rates to apparently keep the economy on the up and up – but he's unimpressed with the expected rate cut. Also, the Fed says that lowering rates has nothing to do with getting Trump off its back. So stop asking.
So what happens next?
Even though the Fed's hinted at it, we'll learn tomorrow whether rates are officially going down. And by how much.
theSkimm
It's unclear if this potential interest rate cut is the Emergen-C to help keep a cold (hint: US recession) away. Or if it's like overmedicating an already healthy economy...potentially fueling economic bubbles like the one that led to the 2008 financial crisis. In other words, the stakes could be high – and this is already being seen as the biggest test for Powell so far.
$: Interest rates impact things like your credit card debt and whether the time is right to take out a mortgage. Here's what lower interest rates could mean for your wallet.
|
