This holiday season bring cheers- federal reserve’s rate-hike pause continues
The Federal Reserve System, the central banking system of the United States has once again put a great smile on the American’s faces with the decision of not imposing any change in the interest rates of credit card. This means that the people need not to worry about their shopping plans via credit cards.
It is to mention that it is past three years that Fed have not brought any change to their interest rates. From December 2008, it is sticking at the same rate even while the world was undergoing with the economic recession.
Furthermore, the Fed revealed that it is not going to change its interest rate till 2013 and will wait for the stabilization of the economy. The decision to this effect was taken in the regulatory meeting of the Fed’s Federal Open Market Committee.
It has been asserted that when the U.S. Federal funds rate increases simultaneously there will be an increase in the credit card’s APR. The reason for this is the American’s credit cards are known as the variable rate cards.
Usually, the rates for these cards cannot be change prior to the given notice of 45 days. In case you got late with the payment for about 60 days, then the bank is capable of boosting your APR with the prior notice.
Besides this, another factor responsible for the change in interest rates is the deliberate alteration in the prime rate. There are several American’s credit cards that are tied with the prime rate. Whenever there is a change in the prime rate, the APR of the credit card changes immediately with the same amount.
How there is a change in the prime rates? It is simple that when there is a change in the fed funds rate, the prime rate also faces the change with the exact amount. In order to experience a great change in the interest rates of credit cards, Fed wants some expansion in the economy.
As per the information given by the Federal Open Market Committee, that there is a slight increase in the economic expansion leading to the moderate growth of the global economy in terms of employment generation. The moderate expansion in the economic growth will gradually improve the employment prospects in the country and it is important also. Otherwise, the congestion in the financial market would result in the massive downfall of the economic independence of the country.
