Corporate Finance & Governance | Leadership / Management

Fed rate cuts to the rescue?

StocksWith thoughts of recession on everyone's minds these days, the Federal Reserve cuts short-term interest rates by 0.75 percent in an effort to shore up our battered economy.

Will it help? That depends on who you ask. staff writer David Goldman says the Fed's rate cut is a good thing for consumers with hefty home-centric debt. "Since the Fed rate affects how much consumers pay on credit card debt, home equity lines of credit and auto loans, consumers' monthly debt obligations should slide along with the rate cut," Goldman writes. "For home owners with home equity lines of credit, it shouldn't be long before they see lower monthly loan payments."

Whether the economy as a whole will benefit, though, is more uncertain. Forbes Senior Editor Allan Sloan isn't expecting much.  It can take months to see the results of interest-rate cuts, Sloan argues -- too long, in fact, to have any impact on short-term roller-coaster rides like the one we're seeing now.

At least one CFO, though, says the Fed's move will be good for a number of unintended reasons. According to's Jason Karaian, the Fed just made the unnamed CFO's job easier. "Indeed," Karaian writes, "the gloomy message is so loud that it makes his message to employees crystal clear: Focus on your job and fight off complacency. ... The rate-cut announcement will also affect the executive suite and boardrooms. (The CFO) expects that senior managers and directors will think twice about big capital expenditures and new hires."

What's your take? Will the rate cut help boost the economy out of its current doldrums?


Bill Sheridan