‘Lower interest rates’ great for some, bad for savers

With Labor Day behind us, look for the phrase, “hopes of lower interest rates,” to build to a crescendo around Wall Street.  Those words refer to a cut, possibly one-quarter percent, in the current 5.25 percent Fed funds rate.  It could come out of a Sept. 18 Fed meeting.

A cut is widely regarded as a positive development.

But for others, especially budget-pinched families and retirees depending on supplemental monthly income, “lower interest rates” also means less yields on savings instruments, including certificates of deposits, reminds Grumpy Editor.  That aspect has not been widely reported in the business press.

Amid cries about a credit crunch, which has been mentioned as a cause of the recent zig-zag stock market, most financial institutions have quietly clipped CD rates.  That action started in early August.  CD holders, especially those about to renew maturing certificates, are grumbling at the sudden “lower interest rates.”

Yields on CDs will erode further with looming cuts in the Fed funds rate.   Less income via interest to savers means many consumers will have slimmer wallets, putting a squeeze on year-end holiday sales.

So “lower interest rates” brings smiles or frowns, depending on who is affected.