How Do Interest Rate Forecasts Help Consumers?


Quick Answer

Interest rates forecasts can help consumers because they can indicate whether it is an appropriate time to either borrow, buy a home or make certain types of investments. Interest rates play an important role in the supply and demand for money. With its policy actions, the Federal Reserve can influence the direction of interest rates in either a weak or strong economy, as noted by Bankrate.

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Full Answer

In an economy that is rising fast, the Federal Reserve can raise interest rates to avoid possible inflation. Although this can mean an increase in the cost of borrowing money from a bank, an increase in interest rates can help consumers because banks can offer higher interests on saving deposit accounts, as noted by Bankrate. Higher interest rates can also be a signal that consumers need to save rather than spend or borrow money.

However, in a slow economy, the Federal Reserve can lower interest rates, which helps consumers be able to borrow money at lower rates for a use, such as buying a home, as noted by Foundation for Living. Mortgage rates can also decrease in a slow economy. Similarly, consumers can also decide to spend more money for goods, which in turn helps businesses flourish. Consumers may also invest money more readily.

By raising or lowering interest rates, the Federal Reserve ensures that the economy stays sound. It can also impact how consumers spend money or either borrow or save it.

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