Essay about Supply and Demand and Wsj Prime Rate

Submitted By marcusalan1986
Words: 339
Pages: 2

Our current economy has kept our interest rates somewhat stagnant as the Federal Open Market Committee tries to stabilize price and employment. The central bank benchmark interest rate has been holding at around 0.25 percent. This is the rate at which commercial banks can borrow money. A lower benchmark rate for commercial banks can result in lower borrowing rates for consumers. The rate at which commercial banks lend to its best consumers (i.e., those customers with the best credit) is known as the prime rate. The prime rate has been around 3.25 for the last year. The lower prime rate is the reason for the record low mortgage and vehicle rates that consumers have been taking advantage over the last few years. As the economy improves interest rates will gradually increase. A recent example was the gradual increase in the mortgage rates over the summer from positive economic news on the housing market.
| |This week |Month ago |Year ago |
|WSJ Prime Rate |3.25 |3.25 |3.25 |
|Federal Discount Rate |0.75 |0.75 |0.75 |
|Fed Funds Rate (Current |0.25 |0.25 |0.25 |
|target rate 0-0.25) | | | |
|11th District Cost of Funds |0.954 |0.951 |1.116 |

[pic] Lower interest rates can have a positive effect on several aspects of aggregate supply and demand. Lower borrowing rates can…