Lowering of interest rates as a result of struggling US economy by Petra Calovkova

US economy is struggling and therefore there will be another lowering of interest rates. Federal Reserve Board Chairman, Ben Bernanke, made this decision third time during this year. This way they want to support businesses and also consumers in increasing their economic activity. But lower interest rates might also cause inflation, cheaper export but lower import. Changing of interest rates few years ago, when they were too low for quite a long time, brought along housing boom, while nowadays there is a problem with selling the houses in US. It would change a lot if people would be able to forecast the growth or lowering of interest rates. It is hard to predict though, because they actually reflect human activity. One of the factors influencing these changes is for example borrowing money when there is a demand of those who want to borrow the money and then those who have the money to lend. If the demand is high, the interest rates are higher than they could be. Another factor can be governments printing more money than is needed. If more money is available, then interest rates lower. And for instance also inflation is an important factor. If it changes, also interest rates are about to be higher or lower. But back to the US case, Martin Cantor, director of the Long Island Economic and Social Policy Institute at Dowling College, said that contrary to the common belief, the federal funds rate has a "very minor effect" on consumer rates, or buyers' behavior. However, who knows. Ben Bernanke also has his reasons to think that it might matter. Let's see what the result would be.

by Petra Calovkova for PocketNews (http://pocketnews.tv)

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