Quick-Hit Reaction: Fed to Keep Interest Rates Low

FIRST PERSON | MSNBC reports the Federal Reserve seemed to indicate the U.S. economy will continue in a weakened state by announcing interest rates will be near zero until 2013. As I continue to worry about my own financial situation, here are three things I find notable about this announcement.

This really makes me wonder about the odds of a double-dip recession. As the economy basically stalled out and the stock markets have been plunging recently, it seems there is more of a chance of a double-dip recession than what investors and the government first thought. Basically this means that after the recession of 2008, we saw a glimmer of recovery but then it was followed by another recession. This usually occurs because there is a slow down in growth in the economy, like there is now due to spending cuts and also the decrease in demand for products, which is why unemployment has remained fairly steady.

The way I see this announcement is there are signs of a double-dip recession and believe it is more than likely to happen within the next year. I am really worried about this because if the economy was picking up, then there would not be a need to keep interest rates at record lows. Considering this announcement keeps the interest rates near zero for two more years, I have come to think we will be in a double-dip recession.

As for me personally, I also find this announcement to be basically saying the Federal Reserve has done everything possible to get the economy going and it is not working. I feel the Fed is throwing in the white flag and surrendering to the possibility of more hard times ahead despite the efforts. The somber language used today just reminded me that we are still in an economic mess and now is the time to save.

I think I am going to start saving as much as possible, gathering supplies and creating a food storage unit for my family. I have two cats and want to make sure that no matter what I can take care of them, so I will be stocking up cat litter and cat food. I found this announcement to basically say that everyone should be preparing for the worst but hoping for the best; that is exactly what I will do.

This announcement will also affect how much money I plan on spending each month on entertainment and other non-essential items. I think I will be cutting back on spending because if the economy is stalled and there is a chance of a double-dip recession, then I want to be wise with the little money I do have. The bigger picture for my household and family will be watch what we spend money on, the amount of money we spend and to save as much as possible until there is some financial stability in the economy.

John W. Schoen, “Fed, with few cards left, makes unusual pledge”, MSNBC

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