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Great rates, but so what?

Wednesday, Jun 20, 2012 - 01:28

June 20 - Consumers and businesses will have access to rock bottom interest rates for years to come- but the Fed's move to extend its so-called Operation Twist to keep rates low could have unintended consequences. Bobbi Rebell reports.

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The U.S. Federal Reserve says it will twist until the end of the year to keep long term interest rates at rock bottom lows. But will it make a difference? Fed Chairman Ben Bernanke says historically low rates have helped the average American. SOUNDBITE: BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE (ENGLISH) SAYING: "Many Americans are able to take advantage of lower interest rates. Many people have refinanced or bought homes. Others have taken out loans to buy cars. Auto loans are cheap and broadly available. So there has been impact through lower interest rates." But will continued low rates really matter? Wells Fargo's Mark Vitner says it actually could backfire. SOUNDBITE: MARK VITNER, SENIOR ECONOMIST AND MANAGING DIRECTOR, WELLS FARGO (ENGLISH) SAYING: "If anything it gives them less incentive and the reason why it gives them less incentive is there is no reason to hurry. Rates are likely to remain low for a very long period." Businesses, however, could do very well. JPMorgan Chase's Jim Glassman says: SOUNDBITE: JIM GLASSMAN, SENIOR U.S. ECONOMIST AND MANAGING DIRECTOR, JPMORGAN CHASE (ENGLISH) SAYING: "By driving interest rates down it drives down the cost of financing. It makes businesses spend. It makes businesses more willing to embark on the long term projects." And hire people. But Glassman adds there is a downside to low rates. Folks on fixed incomes could see their spending power erode even further during these hard times. Bobbi Rebell, Reuters.

Great rates, but so what?

Wednesday, Jun 20, 2012 - 01:28

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