Federal Reserve lowering rates in response to coronavirus could mean more money in your pocket, financial adviser says
Monroe financial adviser Darren Oglesby said the Federal Reserve's decision to lower interest rates in response to the coronavirus could mean more money in your pocket.
The Federal Reserve announced on Tuesday that it would be lowering the federal funds rate by half a percentage point in response to the risk the coronavirus could have on the economy.
Oglesby said the outbreak in China is causing fears that production could slow down.
"The biggest thing you worry about in economic crisis is demand. That's not what we're worried about this time. This time, we're worried about supply," he said.
He said stocks have dropped as people worry businesses will sell less product when supply slows down.
Oglesby said the rate cut means banks can borrow money from both the Federal Reserve and each other at lower interest rates.
"Well, if they can borrow at a lower interest rate, they're apt to borrow more. If they're apt to borrow more, that means the banks have more money. If they have more money and they feel better about lending it, then they will lend it to consumers. Now the consumer's rate's drop," he said.
Oglesby said, if you have the money, times like these have historically been good buying opportunities.
"The playbook here is pretty simple. If you don't need the money, you've got excess cash, you've got safer categories and you're a long term investor, the thing to do is go out and employ a proactive plan now. Don't wait until after things have rebounded. This is a tremendous opportunity for the people in the right positions," he said.
Oglesby said the cut hasn't helped ease worries so far, as stocks dropped after the announcement. He said the move has people worried that things may be worse than originally thought. However, he said the long term effects could pay off for the economy.
"The effects down the line could be, when money's back in people's pockets, when we have the supply chain come back and the demand is still there, people will have more money to spend on goods and services, which should cause us to rebound sooner than we would have or quicker than we would have or in a more dramatic fashion than we would have without the rate cut," he said.
Oglesby said he expects rates for things such as home equity lines of credit or credit card loans to lower within the week, if not overnight.