The Economic Perspective: “Why Have Interest Rates Plunged?”

I’m Mary Walden, with economist MW, welcoming you to the economic perspective.   Today’s program asks why interest rates have plunged.  Mike, interest rates had been steadily rising for several years.  Yet this year, that trend has changed, and interest rates have moved lower.   Why has this happened, and is it a good thing?

Mike:  Summary Answer

  1. The big drop in interest rates was totally against most economists forecast
  2. Depending on the term, rates are down between one-half and a full % in the last seven months
  3. Two big reasons – Fed has announced they were not further raising their key rate
  4. Second – fears of a much slower economy, and maybe recession
  5. Lower rates are good for borrowers – have already seen more activity for home loans
  6. Bad for investors in financial securities
  7. And bad if reason is a faltering economy
  8. I’m MW

Mary:  And I’m Mary Walden for the Economic Perspective, an NC State Extension program from the Department of Agricultural and Resource Economics.