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American Morning
Minding Your Business: Word on Fed Rate Cut Coming Today
Aired June 25, 2003 - 07:48 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: The Fed might be ready to cut interest rates again today. Could a cut be unkind, though?
Andy Serwer is "Minding Your Business" and checks in on that.
And this really is the big news financially today.
ANDY SERWER, "FORTUNE" MAGAZINE: This is the big day.
HEMMER: What are we expecting?
SERWER: Well, either a quarter or a half. I mean, I've been on record saying -- surprise, surprise.
KAGAN: (UNINTELLIGIBLE) a half.
SERWER: Well, I've been on record saying a quarter of a point.
KAGAN: Yes.
SERWER: I'm sticking with it, particularly after yesterday's Consumer Confidence Report for May showing consumer confidence levels fairly steady. People are fairly happy with the way things are going, which may be a bit of a surprise. The Fed looks at that closely.
Also, it's more important what the Fed says than the actual cut, whether they see a recovery in the offing.
But let's tick through some of the bullet points here as to how consumers will fare with a rate cut. Kind of a mixed bag here. Let's start off with a positive, though. Home equity loans. These do track the Fed funds rates fairly closely, and that's a positive, because they will drop. So, the down arrow is a positive there, of course, because lower rates are good for it.
Now, money market rates, this is a big negative, because they will fall when rates cut. And they're already at .67 percent. You know, they were 6 percent a couple of years ago; now .67 percent. And some funds have expenses higher than that. That's not a way to make money. That's a way to lose money.
KAGAN: They're going to start charging you rent.
(CROSSTALK)
SERWER: Yes, exactly. You can shop around, though, Daryn, because you can get 1 percent if you go on the Net. Some of these online banks if have FDIC insurance, you're perfectly fine there. So make sure you shop around.
Also, mortgage rates, let's go there. You're not going to get anything here, because they don't really...
HEMMER: Nothing?
SERWER: No. They track the 10-year note, Bill. They don't really track the Fed funds rates. Don't get cute here if you're looking to refi and wait for rates to fall more, because actually they've ticked up an eighth of a point over the past couple of weeks.
Credit card rates? Forget it. I mean, what do you think? You're not going to -- the banks don't give you anything here. Over 14 percent still on credit cards, that's right. And they have actually ticked up since the beginning of the year. The reason, banks are concerned about bankruptcies, which have been on rise.
And then finally, auto loans. You're not going to get any help there. I mean, what do you want? They're at zero...
KAGAN: They're already at zero.
SERWER: You're not going to go -- they're not going to pay you to buy a car. I mean, in some senses, they already are. But you're at 0 to 1 percent there, so don't look for much help there.
So, kind of a mixed bag, and, you know, a lot of people, seniors especially...
KAGAN: Yes.
SERWER: ... savings accounts, it's not a good thing when rates are cut.
KAGAN: When you're on a fixed income it's very difficult for those folks.
SERWER: That's right, yes.
HEMMER: 2:15?
SERWER: Yes, that's later today.
HEMMER: Thanks, Andy.
KAGAN: We will look forward to it.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.
Aired June 25, 2003 - 07:48 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: The Fed might be ready to cut interest rates again today. Could a cut be unkind, though?
Andy Serwer is "Minding Your Business" and checks in on that.
And this really is the big news financially today.
ANDY SERWER, "FORTUNE" MAGAZINE: This is the big day.
HEMMER: What are we expecting?
SERWER: Well, either a quarter or a half. I mean, I've been on record saying -- surprise, surprise.
KAGAN: (UNINTELLIGIBLE) a half.
SERWER: Well, I've been on record saying a quarter of a point.
KAGAN: Yes.
SERWER: I'm sticking with it, particularly after yesterday's Consumer Confidence Report for May showing consumer confidence levels fairly steady. People are fairly happy with the way things are going, which may be a bit of a surprise. The Fed looks at that closely.
Also, it's more important what the Fed says than the actual cut, whether they see a recovery in the offing.
But let's tick through some of the bullet points here as to how consumers will fare with a rate cut. Kind of a mixed bag here. Let's start off with a positive, though. Home equity loans. These do track the Fed funds rates fairly closely, and that's a positive, because they will drop. So, the down arrow is a positive there, of course, because lower rates are good for it.
Now, money market rates, this is a big negative, because they will fall when rates cut. And they're already at .67 percent. You know, they were 6 percent a couple of years ago; now .67 percent. And some funds have expenses higher than that. That's not a way to make money. That's a way to lose money.
KAGAN: They're going to start charging you rent.
(CROSSTALK)
SERWER: Yes, exactly. You can shop around, though, Daryn, because you can get 1 percent if you go on the Net. Some of these online banks if have FDIC insurance, you're perfectly fine there. So make sure you shop around.
Also, mortgage rates, let's go there. You're not going to get anything here, because they don't really...
HEMMER: Nothing?
SERWER: No. They track the 10-year note, Bill. They don't really track the Fed funds rates. Don't get cute here if you're looking to refi and wait for rates to fall more, because actually they've ticked up an eighth of a point over the past couple of weeks.
Credit card rates? Forget it. I mean, what do you think? You're not going to -- the banks don't give you anything here. Over 14 percent still on credit cards, that's right. And they have actually ticked up since the beginning of the year. The reason, banks are concerned about bankruptcies, which have been on rise.
And then finally, auto loans. You're not going to get any help there. I mean, what do you want? They're at zero...
KAGAN: They're already at zero.
SERWER: You're not going to go -- they're not going to pay you to buy a car. I mean, in some senses, they already are. But you're at 0 to 1 percent there, so don't look for much help there.
So, kind of a mixed bag, and, you know, a lot of people, seniors especially...
KAGAN: Yes.
SERWER: ... savings accounts, it's not a good thing when rates are cut.
KAGAN: When you're on a fixed income it's very difficult for those folks.
SERWER: That's right, yes.
HEMMER: 2:15?
SERWER: Yes, that's later today.
HEMMER: Thanks, Andy.
KAGAN: We will look forward to it.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.
